SINGAPORE (Nov 14): DBS is maintaining its “hold” recommendation on Vard Holdings with a target price of 25 cents.
The research house’s call came after the group announced on Monday that its parent company, Fincantieri Oil & Gas has proposed a voluntary delisting via an exit offer to acquire all of Vard’s remaining shares for 25 cents per share in cash.
See: Vard gets 25 cents/share offer in second privatisation attempt by controlling shareholder
Fincantieri currently is a 79.34% shareholder of Vard and this is its second attempt to take Vard private.
Ficantieri previously offered 24 cents per share last year, but was thwarted by minority shareholders as it fell short of the minimum threshold needed to force a delisting.
The board of directors of Vard has considered the delisting proposal and resolved to make an application to SGX for approval as well as to convene an extraordinary general meeting in due course to seek shareholder approval.
Hence, the delisting will be conditional upon SGX’s agreement to Vard’s delisting application, as well as the delisting resolution being approved at the general meeting by a majority of at least 75% and not being voted against by 10% or more of the total number of Vard shares held by shareholders present and voting.
If Ficantieri crosses the 90% ownership threshold during the exit offer, it can compulsorily acquire all of the remaining shares.
In a Tuesday report, analyst Suvro Sarkar says, “While the offer price looks fair to us, given it is almost the same as our target price for Vard, it remains to be seen whether those shareholders who did not tender in the earlier round will agree to the delisting and Exit Offer this time around, given the pricing is about the same.”
However, the analyst notes that vard’s shares have not moved significantly since the close of the last offer, despite improvement in oil price as its earnings are still in the red, and outlook for order wins is not that rosy either.
According to Sarker, this might create an incentive for shareholders to accept the offer this time.
Looking at the group’s 3Q17 results, it announced on Nov 10 that its losses narrowed to NOK9 million ($1.5 million) from losses of NOK104 million in 3Q16 on higher sales.
Revenue for the quarter was up by 33% to NOK2 billion from NOK1.5 billion a year ago, due to high activity levels at the yards in Romania and Vietnam
The group attributed the high activity levels to rapid progress made on the Module Carrier Vessels projects for Topaz Energy and Marine, and Kazmortransflot, as well as the ongoing construction on all six expedition cruise vessels contracted in 2016.
See: Vard cuts 3Q losses to $1.5 mil on higher revenue & lower restructuring costs
“Compared to other SGX-listed OSV shipbuilders, Vard has done well in demonstrating its ability to diversify into non-offshore vessels,” says Sarkar.
As at 3.12pm, shares in Vard are trading at 24 cents or 0.8 times FY17 book.
