Vard (formerly: STX OSV)

[Greenrookie]

I would prefer problems to be laid out in the open and transparent. In this case, I doubt the Italians create or worsen te problems, more likely than not, it is more of a question of transparency than competency.

[Clement]

It's been just a few months since taking control this co. The Italians have to issue such a profit guidance. And not due to an external, macro factor.
What does that tell us about their competence or lack of? The thoroughness of their due diligence process?
Or is there an external unforseen factor?

Hi, the nature of long term contract work makes it very dependent on assumptions about the future. The contracts were signed at a time when the macro factors in Brazil were much more favorable, specifically inflation. There is a learning curve when operating in new markets and Vard's management probably reassessed the future profitability of their legacy contracts and decided to do some spring cleaning. I invested after the 1q results fully knowing about these problems and if the margin is due to reassessment, I will consider myself early. If not, I will consider myself wrong.

[KopiKat]

You should do your own numbers but from a simplistic investment "pattern" point of view:
* If a company comprises of a good part and a bad part AND
* the bad part can either be corrected or worse case cut away AND
* the price is way below what the good part is worth AND
* management is rational
You may have found a gem hidden in a lemon.
Vested in a small position. Will add when the technical indicators turn upwards.
P.S.: Sorry for the way the post is written - reflects my IT background.
Cheers!

if(company.asset.bad == 1 && company.asset.good == 1)
{
if(company.asset.bad.correctable == 1 || company.asset.bad.removable == 1)
{
if(company.asset.good.value > company.asset.bad.value + value_margin)
{
if(company.management.rational == 1)
{
gem_found = 1;
}else lemon_found = 1;
}else lemon_found = 1;
}else lemon_found = 1;
}else lemon_found = 1;

When market is bearish, there'll always be a strong tendency to focus on the negatives which may get blown out of proportion. When the market is bullish, the focus shifts to the positives and prices can get very forward...

Our job here is to try as best as we can to look at things objectively, work out the possibilities and probabilities, basically look at the risk-reward and make a decision whether it's worth doing anything. In this case, the picture ought to get clearer on 11-Jul when they release Q2 results.

[Clement]

I'd suggest that anyone vested in Vard learn more about the operations and prepare their buy/hold/sell indicators. The results are released on a Thursday and any hesitation in decision can lead to more unfavorable prices.

[gwMoat]

I would prefer problems to be laid out in the open and transparent. In this case, I doubt the Italians create or worsen te problems, more likely than not, it is more of a question of transparency than competency.

We certainly need some clarity from the Italians.
Let's not forget they bought this Co. from the Koreans who were broke and desperate for cash( so supposedly a good deal). Their mandatory offer of $1.22(the price they paid) deemed low by IFA and investors(they failed to take it private)
Now the market is voting it's price lower..
The Koreans may be broke, but they're laughing all the way to their liquidators!
Somehow I agree it's a question of tranparency.

[KopiKat]

Results are out...

Financials
Presentations

at first look, I must say the accounts are very well done... Tiny Operating Profit, still got PBT but slip into a loss for Q2 after tax...

Look at it again in detail later..

[Clement]

Results are out...

Financials
Presentations

at first look, I must say the accounts are very well done... Tiny Operating Profit, still got PBT but slip into a loss for Q2 after tax...

Look at it again in detail later..

Results seem ok. Loss due to impairment charge of NOK70 million, which is probably one off and roughly what I expected. Cash flow from operations turned positive qoq.

[KopiKat]

Results are out...

Financials
Presentations

at first look, I must say the accounts are very well done... Tiny Operating Profit, still got PBT but slip into a loss for Q2 after tax...

Look at it again in detail later..

Results seem ok. Loss due to impairment charge of NOK70 million, which is probably one off and roughly what I expected. Cash flow from operations turned positive qoq.

Even if I were to add back the impairment, it's still slightly below my expectation. Looks like the market is more efficient than me...

They seem to be pushing the results to the limit... technically, remaining profitable at the Operating & PBT level...

Their forward statement sounded rather optimistic to me tho'... But, that could be due to my being vested and seeing the glass as being half full...

[Clement]

Results are out...

Financials
Presentations

at first look, I must say the accounts are very well done... Tiny Operating Profit, still got PBT but slip into a loss for Q2 after tax...

Look at it again in detail later..

Results seem ok. Loss due to impairment charge of NOK70 million, which is probably one off and roughly what I expected. Cash flow from operations turned positive qoq.

Even if I were to add back the impairment, it's still slightly below my expectation. Looks like the market is more efficient than me...

They seem to be pushing the results to the limit... technically, remaining profitable at the Operating & PBT level...

Their forward statement sounded rather optimistic to me tho'... But, that could be due to my being vested and seeing the glass as being half full...

Hi, what I meant was the nature of the "poor results" was within my expectations. As to outlooks, I too am quite optimistic on Vard's Brazilian operations when it comes to order wins, but i am not sure about execution ability and margins. It all depends on whether the shipbuilding problems there persist.

The results were affected by numerous one offs
1) Goodwill impairment - Non tax deductible
2) Non-recognition of deferred tax assets
3) Vard promar pre operating costs

1 and 2 resulted in a ridiculous tax rate for the period.

I am inclined to focus on operating cash flow for unaudited statements and therefore find the results okay.

[GPD]

They practically lost one quarter of earning due to Brazil operation alone which accounts for about roughly one-quarter of their order book. I think this shows how fragile their margin is getting.

Mgmt made some positive statements on getting the Brazil operation under control but they have said the same in last quarter. This problem started in 2012 and so far they have not got it under control.

Their order book has not shown a respectable increase as well and also inefficient uses of resource with Vietnam yard sitting idling most of the time and elsewhere too much to do. They seems to have enough work to do till FY14 but after that is a cliff.

Since the Brazil problems is still very much alive, their full year profit is like to be seriously hit. The average forecast EPS for FY13 is about 12cts after this profit guidance but I suspect it is going to be much lower than this unless Brazil problems magically disappear, Vietnam stop idling and other regions improve their margin.

Just my opinions.