SEAMEC Ltd

A ship hired by the day

Far out at sea, above an oil or gas field, sits a specialised vessel with divers, robots and cranes, maintaining the pipes and wellheads beneath the waves. SEAMEC owns the largest Indian fleet of these multi-support ships and rents them out by the day, with a handful of bulk carriers beside them that haul cargo for hire. When offshore oil work is busy and ships are scarce, the daily rates soar and the profits with them; when the work dries up, the same steel sits idle and earns nothing.

That cyclical heartbeat is the whole story here — and it cuts both ways, which is why this one needs a careful, unromantic eye.

Cheap on earnings that are riding high

At about sixteen times earnings the share looks inexpensive, and below the multiple it has worn in its own past. But Graham taught the value buyer to be most suspicious of a cyclical that looks cheapest, because a low price-to-earnings figure often means earnings at a peak about to roll over, not a true bargain. And SEAMEC's profits are plainly near a high: they have more than trebled in three years, and the latest year alone saw them leap as charter rates boomed. The share itself has already risen by nearly ninety per cent in a year — this is not a forgotten, beaten-down asset but a cyclical caught mid-surge.

So the "cheapness" deserves a warning label. The very earnings that make sixteen times look low are themselves unusually fat.

What to weigh

The risks are the cycle's risks. Charter rates fall as surely as they rise, and a softer offshore market would shrink these profits quickly, making today's modest multiple look expensive in hindsight. The company pays no dividend, so the owner is rewarded only by the share price. Its assets are a small fleet of ageing, specialised ships whose value swings with the very market they serve.

What this asks of you

Treat this with more caution than its low multiple suggests. The thesis, if one buys it, is that the offshore-services upcycle has further to run and the fleet keeps earning fat day-rates a while longer. But a value buyer's instinct here is wariness: a cyclical bought near peak earnings carries thin protection, and the recent ninety-per-cent run is a sign the easy money has been made. If owned at all, own it small — with the cycle, not the trailing multiple, front of mind, and a readiness to leave before the tide turns.