Thalassa Holdings share price sank nearly 24% following publication of its interim results for the first half, as of 30 June, in a vivid display of the anxiety that continues to infect investors. My personal opinion is that the anxiety is not caused so much by any particular company report, but more so by concerns about the sustainability of the bullish market, the continuing uncertainties of economic stabilization and the increasing geopolitical tensions that have the potential to have a deleterious effect on businesses with a global footprint. Thalassa is one of those companies.
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I submit that the decline in Thalassa shares is not a result of anxiety about the company’s interim results so much as it is a reaction to the collective anxieties mentioned in the first paragraph when a company hits a bump in the road.
Look at it this way: You drive by the hospital every day on your way to work. The road is a bit bumpy, but you have, long ago, gotten used to it. Today, however, your pregnant wife has come full-term and the baby is on the way. Now, as you hurry along that same road, your anxiety about the greater issues causes you to feel every bump much more intensely. Same bumps. Different situation.
I’m not saying that Thalassa’s report would not cause some amount of concern under any conditions. I am saying that a 24% decline on the day is probably a disproportionate reaction based on an overriding anxiety with more overreaching concerns. The report was not a disaster, but it was a mixed bag.
The glaring and most bottom-line issues were
- a decline in revenue from $11.64 million to $9.26 million year-on year
- a decline in pre-tax profit from $1.39 million to $897,913 year-on-year
Nonetheless, its tender and order pipeline increased by 23% to $175 million, some of which will have positive impact during the second half. Then again, and I repeat – a root cause of anxiety – contracts ready for deployment in Russia during the balance of 2014 will continue to be in jeopardy until the situation in the Ukraine finds resolution and U.S. and EU sanctions against Russia are eased or lifted entirely. For the time being, at least, Thalassa will not be able to turn those contracts into cash.
So, let’s put a little more perspective on the share price activity. On it’s own merit, should the report have caused a 24% drop in share price. I think not. For one thing, there were things in the report that indicated great progress in efficiencies, like a 2.6% growth in gross profit, that should improve bottom line outcome ongoing.
Finally, let’s look at the historic activity of the company’s share price for some insight. Two-thirds of the decline today came before the market opened, pointing to institutional investor knee-jerking. As the day progressed, it became obvious that enough investors saw this as a buy opportunity so that the share price surely, but steadily climbed throughout the day. And, although Thalassa shares have declined by a significant 28.5% over the past 52 weeks, they are still 243.8% higher than on 18 September 2012.
As Thalassa chairman, Duncan Soukup noted, “Notwithstanding the current political situation, we continue to believe that the group, with its strong position in niche markets, is very well placed to create significant shareholder value over the next few years.“
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