Change For MMA . Com, page-19

I found Peter Kennan's view off his website from Jan 16.
Obviously the equation has changed for him with the sale of the supply base for much less than it was worth.
The game it seems is to supply just enough capital to scrape a business in this situation through which is smart.
"Your position in Australian based, MMA Offshore (ASX:MRM) appears interesting. I see it’s priced at 11- 12% of book value there as well. Can you give us an understanding of your investment thesis? PK: The investment thesis is pretty similar to Emeco. The oversupply of vessels is in some ways a tougher situation than the mining sector. However, this company has much less leverage, and it has non-core assets that can be sold. It has roughly half its vessels in Australia and the other half in Asia. The original business was just focused on the Australian Northwest Shelf. They have a supply base that services that area; it’s a port and staging yard. That asset’s worth about $110 million and is very saleable. We want them to consider selling that asset to deleverage the company, which then gives them the capacity to buy back stock. They have $900 million of vessels, and $300 million of debt. We like it because it’s heavily discounted but not that leveraged. We are a 5% shareholder. We could become the largest shareholder and have influence if needed. Management is very sensible. How are you looking at valuation? PK: If they sell the supply base, the price of the vessels is about 15% of book value. The book values, in the large part, are based on depreciated construction cost. EV/EBITDA at the moment is about 6x based on historically very low EBITDA. EBITDA was $250 million a couple of years back, then last year it was about $80 million for the second half of the year. This year, I think it will be $80 million for the whole year. That should be the low point. They’re at 55% utilization, and industry utilization is at 60%. What price would you look to potentially scale out of your position (all else being equal)? PK: It depends on how other things in the portfolio move. There’s an opportunity cost decision here. If it pops and nothing else has moved, then we may re-weight to other opportunities. If everything else is moving with it, then we can hold it longer. I think the book value is a sensible valuation. However, we won’t wait for all of that. Once a position becomes 20-25% of our portfolio, we begin to back it off. It depends on if we’re getting inflows as well. I like Mohnish’s approach to this —-avoid making quick decisions on anything. There’s a rare circumstance where you do have to act quickly, Generally speaking, I like to wait for the dust to settle. I prefer the company to make their announcement, digest the announcement, speak to some people, talk to other experts, talk to management, form a view, and then make a decision. For example, if management started heading in the wrong direction, our response would not be to sell because there’s no controlling shareholder. It would be to launch probably an activist campaign and get other people to come up the register, force their hand and find the right person to get in there and fix the situation."