Vard, formerly known as STX OSV stock price dropped significantly over the past few weeks, leading many investors to panic. I have received so many comments on whether they should cut loss and what not. I still maintain my view that if the stock is fundamentally undervalued, I don’t see any reason to drop the stock. The same view is confirmed by all the analysts covering Vard.
A friend of mine, is also an investor in Vard and decided to send an email to quiz the Vard Investor Relations. I will not list out the actual conversation, but a summary of the exchange between them.
Investor: Questions the independence of the Board of Directors and management in making corporate and strategic decisions as well as the role of the Parent Fincantieri.
Vard IR: Board is comprised of 3 Fincantieri nominated Directors, Chairman, 2 Independent Directors, CEO, and Executive Director. As such, Fincantieri can weigh in on Board decisions, but the independent directors will help to protect the rights of minority shareholders. The executive management reports directly to the board.
He also comments from a personal viewpoint that Fincantieri adopts a long term view to developing and growing the company unlike the previous owner STX.
Investor: Questions the current and upcoming book orders
Vard IR: 48 Vessels in the order book at a value of NOK 15 bil based on FY 2012 report. In Q1, took in 3 new orders worth NOK 3 bil and signed one LOI and one firm contract at end of Q1. Vard’s aim is to secure at least as many new orders (in value, not necessarily number of ships) as revenues, i.e. about NOK 12 bil on an annualized basis. Expected to achieve this in 2013, and the YTD order intake points towards that.
Investor: Questions the role of CEO Roy Reite in the future of Vard
Vard: No indication of any change as he is very important, especially on the sales side. Fincantieri does not intend to make any changes to the management team or business model.
Investor: Questions the dividend payout ratio going forward
Vard: Will commit to policy as per IPO, minimum 30% dividend payout ratio. While it was higher in 2012 due to STX cash flow issues, Fincantieri will adopt a longer term view and balance payout with Vard’s investment requirements.
Investor: Questions the accounting standards and revenue recognition method.
Vard: Fully compliant with IFRS.
There you have it, a very prompt answer that helps to reassure investors that they have little to fear about the new owner Fincantieri. If anything, Fincantieri may be a better owner as they have a long term view, which is in line with investors.
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