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Hot stock: Vard hits record low, prompts SGX query

Wednesday, August 19, 2015 - 11:02

SHIPBUILDER Vard Holdings on Wednesday slumped as much as 10.5 Singapore cents, or 28 per cent, to S$0.27 on the stock market, prompting a query from Singapore Exchange (SGX) to disclose any information not previously announced that might explain the trading.

By 10.59am, some 4.3 million shares had changed hands. It had also recovered to S$0.315, although still 16 per cent down.

The record low it reached outdid even the most pessimistic of analysts' target prices after it reported a challenging second quarter on July 22.

A number of research houses have "sell" calls on Vard, including RHB, Maybank, CIMB and OCBC, with target prices ranging from S$0.35 (CIMB and Maybank) to S$0.41 (OCBC).

Maybank said Vard's order book, whose value fell far below its expectations, could affect yard utilisation and earnings, unless there is a surprise uptick in orders or a strong turnaround in Brazil.

"We also think that Vard may not be able to afford dividends again this year as its cash has been depleted from NOK (Norwegian kroner) 2 billion in Dec 2014 to NOK 904 million at end-Q2."

CIMB agreed, saying: "With significant cash tied up in working capital and requirements expected to rise through H1 2016, we do not expect Vard to pay dividends, especially as profitability is also weak."

In July, Vard had said it had started to cut jobs after activity at its shipyards fell due to the crude oil slump, and it expects the drop in yard utilisation to get worse for the rest of 2015 and 2016.

Its net profit for its second quarter dived 58.6 per cent from the previous year to 58 million Norwegian kroner (S$9.8 million), below market expectations. The slide came on the back of lower revenue for the three months to June 30. Turnover slid 15.4 per cent year on year to 2.49 billion Norwegian kroner on declining additions to its order book.

Last Thursday, Vard said it had won a 60 million Norwegian krone contract to build a coastal fishing vessel for Norway-based Breivik. The vessel is slated for delivery from Vard Braila in Romania in the third quarter of next year.