Charlie Munger has advised that in order to succeed in investing, one of the things that investors should do is to carefully study spin-offs. Indeed, spin-off situations could offer investors a lot of compelling investment opportunities. Recently, Seacor Holdings, Inc. (NYSE:CKH) spun off its helicopter operating business, Era Group Inc (NYSE:ERA). Since then, Seacor Holdings, Inc. (NYSE:CKH) has dropped from $87 to only $70.10 per share, while Era Group Inc (NYSE:ERA) has been staying in the range of $20 – $23 per share. Let’s dig deeper to see what investors should be bullish on in this spin-off situation.
Seacor Holdings, Inc. (NYSE:CKH)is a global leading equipment and services provider to offshore oil/gas and marine transportation industries with several business segments: Offshore Marine Services, Aviation Services, Shipping Services, Inland River Services, and Alcohol Manufacturing. Seacor Holdings, Inc. (NYSE:CKH) has been trying to restructure its business. In December, it sold its energy trading business to Par Petroleum Company for around $14 million. One month later, it spun off Era, the Aviation Services segment.
The majority of Seacor’s revenue, $520 million, or nearly 33% of its total revenue, was generated from the Offshore Marine Services segment. The Aviation Services ranked second with $273 million in revenue, while the Inland River Services contributed around $226 million in revenue in 2012. In its operation, Seacor Holdings, Inc. (NYSE:CKH) employed a quite reasonable leverage level. As of December 2012, it had $1.74 billion in total stockholders’ equity, nearly $960 million in short and long-term debt and nearly $310 million in cash and marketable securities. What makes me interested in Seacor Holdings, Inc. (NYSE:CKH) is that the company has kept buying back its shares over time. Since 2007, the treasury stock has more than doubled, from $487 million to more than $1 billion.
Era Group Inc (NYSE:ERA) is considered one of the biggest global helicopter operators and helicopter services for major integrated oil/gas companies including Shell, Petrobras, Anadarko and the US government. Era Group Inc (NYSE:ERA) has combined helicopter operating business model and contract-leasing business model. The contract-leasing business model, accounting for 20% of the total revenue in the first nine months of 2012, allows Era to reach penetrate new geographic markets while generating increasing cash flow.