Vard Investor Relations Q&A with Private Investor

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.


For more information, you may be interested in:

STX OSV General Offer Ends

Ernst & Young Report Recommends STX OSV Shareholders to Reject $1.22 Offer

STX OSV FY 2012 Results

Reject STX OSV Offer At $1.22

Comments on Straits Times Article Growing Hunger For Business Trust

43 Comments on Vard Investor Relations Q&A with Private Investor

  1. Hi Calvin,
    Mind sharing with us your views on the latest Asian Pay TV IPO? Is it worth subscribing for?

    • Hi Mich, at first glance the company was making losses for 2010 to 2012 historically. It tries to justify by making lots of adjustments to become profitable, which is non IFRS compliant. Basically the company was overleveraged, thus not profitable and it is now using an IPO to reduce leverage. Compared to the historicals, the projections look a bit too rosy, projecting a yield of 7.3% in FY 2013 and 8.25% in FY 2014. I am not too interested in this as it is much harder to believe the projections.

  2. And Croesus Retail’s IPO? would you reckon it is too rosy too?

    • Hi Ng, SY, will be writing about Croesus soon. I am interested in subscribing. Yes there will be forex risks and economic risks, but the current government is trying to give a boost to the economy. Given the high yield of 8% for retail REITs, when retail SREITs are only giving 5% or lower I feel comfortable with taking the forex risks.

  3. Hi Calvin,

    What’s your opinion of croesus retail trust IPO ? Thanks.

  4. Anonymous // May 5, 2013 at 4:30 PM // Reply

    Hi Calvin, I believe it is a business trust rather than a REIT, do correct me if I’m wrong. Would that change your mind about subscribing?

    • Hi Anonymous, yes it is a business trust and not a REIT, however it has stated some covenants in the trust deed which I will share later. In my opinion, it’s just a form of diversification for me and a way to invest in Japan’s economic growth.

  5. Hi Calvin, a penny for your thoughts on the latest results released by Vard?

  6. Hi Calvin, what is your opinion for Vard’s 1st Quarter results?

  7. Would like to find out more about your views for vard. You mentioned you’ll write a post?

  8. Greenrookie // June 11, 2013 at 3:47 PM // Reply

    Hi Calvin,

    While vard has verbally commit to its iPo dividend policy, but their action if not declaring dividend in 2012 FY bothers me a lot. What is your view? Are they going to cut dividends because I see very high construction loans that is as high as equity. Why are they separating the construction loans? How are they going to finance those? Hope to hear your views in your write up on the company.

    • Hi Greenrookie, Vard did declare dividends in FY 2012, it was interim period dividend and not at the end of the year. The reason is that the dividends given in the interim were already so big, due to the previous owner STX, it didn’t make sense to declare additional dividends for that year. Those loans are for building ships, they will be released once the ships are completed, they are not meant to be long term, take it as working capital funding. The profit margins from the ships will have to cover the interest costs of the loans used to build the ships.

  9. Greenrookie // June 13, 2013 at 9:14 AM // Reply

    Hmm.. Thanks again for your sharing. Any idea how to track ship building margin?? Thank you for your selfless sharing and answers to my questions. I have learn much from u esp in your earlier posts on plantation. Plays. Cheers

    • Hi Greenrookie, you can’t get a breakdown on product margins from the financial reports as they are not given. As such you can only rely on overall gross margins, EBITDA margins, EBIT margins, Net Profit Margins and use those to compare to other ship builders.

  10. Mind sharing your views on Vard still? The next result looks like it gonna be bad…

  11. Hi Calvin. Are you still working on the post on VARD? Meanwhile, they have issued profit guidance. What is your view on that?

    • Hi Cloud, nope I am not posting anymore. This time it sounds more serious, have to see how much the Brazilian operations are dragging down profitability.

  12. Vard holdings really look like a pump and dump stock now…

  13. hi calvin
    Vard dipped more than 12% in view of poor earnings this Qtr & FY, what is your thoughts ? Good to buy on weakness ? :)


    • Hi, not under such circumstances. Fundamentally there are challenges with the Brazilian operation and I need more clarity before investing further.

  14. Hi Calvin,

    Vard has hit 0.965 recently. What’s your take on it ? (Sell, buy more ? )

    • Hi SY, I am waiting for more clarity on this and I have to determine if this is a short term trend or something that will persist in the long run.

  15. Hi Calvin … what are your views on Vard now?

  16. Hi Calvin, who do you see in the latest statement by the chairman on the company profit guidance ? We all know that the brazil’s shipyard has always been a problem but despite the repeated assurance by the company, it seem to like fall short of expectation.

    There have been plenty of short selling due to the major analysts’ call to sell and now is definitely not a good time to be Vard’s shareholder. Are you still holding on to yours and also accumulating at the same time? Seem that it will drop further with no sense of direction from the company and it might drop more when the 2nd quarter 2013 is announced.

    • Hi lincoln, yes it doesn’t reflect well on management to continually over promise and under deliver. I am holding on and waiting for more clarity from the results.

      The other yards are still profitable and doing well, so that’s a good thing. Hope this is just a temporary setback.

  17. Hi calvin, it was really very strange. How can I undervalue stock became so pessimistic in just a quarter. Something is very fishy going on with the broker’s analysis. Gang up perhaps?

    How about you? Did you buy Vard based on the broker’s analysis?

    • Hi david, perhaps the top management themselves are not familiar with the ground operations in Brazil. All they see is top end numbers and assurance from the Brazilian management. I bought Vard based on the fact that they are relatively cheap in valuations compared to other O&G plays.

  18. Hi again Calvin, guess we will have to wait for the 2nd Quarter 2013 result to have a better feel of company’s prospect. Anyway do you think it will be wise to have a cut loss strategy if the news on 11th July is negative and earning could be greatly affected by the brazil shipyard. It might dread the price even lower, and the impact will be greater. It sure look scary for now lol.

    • Hi lincoln, depending on how the results turn out, I might trim the holdings a bit or just hold on to what I have. I will try to separate out the Brazilian operations to see how much they are worth without the Brazilian ops, assuming that they can remove it if it doesn’t gel well with the company overall. It’s a bit like Tiger Airways selling Tiger Australia. The parent company is doing well, but it is getting negatively affected by a subsidiary.

  19. Thank you for the insight Calvin. Really hope that you can write an analyst post on the announcement result. At this price it certainly look attractive to lower down again but several factors come into mind- O&G industry not doing well,the Europe crisis ever present , Brazil Yard continue drag down the profit, lousy management etcs. We might have overlooked such things that depressed the price so much.

    • Hi lincoln, I will see what I can do as I have been rather busy. The market is unstable, untapping of shale oil reserves in US can affect O&G profitability around the world, esp. since Vard key market is European. Anyway market usually overreacts, so hopefully the numbers are not as bad.

  20. Hi Calvin, will appreciate alot if you can share your opinion on the latest Vard result.

  21. Hi Calvin,
    Would appreciate if you could share your views on vard now that the 0.810. Likely to breach 0.8. Still worth holding at all?

    • Hi Marcus, see the latest post. Further downside in the stock price in the near future may be expected. So I am just holding and not rushing in until I see further clarity in their turn around on Brazil and new book orders.

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