Would Benjamin Graham Buy Vard Holdings?

Vard Holdings (SGX: MS7) designs and constructs specialised vessels for use in offshore oil and gas exploration.

The company, which is currently priced at S$0.55 a share, is closer to its 52-week low of S$0.49 than its corresponding high of S$1.17. It seems that Vard is cheap. But is it cheap enough to be a value share?

The company sports a strong earnings yield, which currently stands at 9.1%. That is four times more than the risk-free return. But whilst the company has grown its revenue over the last three years, its net income has fallen over the same period.

Less encouraging is the fact that Vard has failed to pay a dividend since 2011. This makes it impossible to gauge the value of Vard on this measure.

Whilst it hasn’t been paying investors, Vard seems to have been reinvesting its profits. Since 2012, Vard has added more than 50% to its total asset value. This has left the company priced at around 90% of its book value, which should provide a good margin for safety.

Another measure of the risk involved is the current ratio. For Vard this stands at 1.1. Whilst it doesn’t exceed the value of two that Benjamin Graham would seek, it suggests that Vard has enough current assets to cope with its liabilities.

It would seem at first glance that Vard is a company in reasonable financial health, which has, perhaps, been unfairly discounted. But that depends on a change in fortunes in relation to a volatile oil industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.