Some key points from its 1Q results announcement suggest that the business is strong , so why the stock plunged?
1.The offshore and marine sector is recovering, backed by demand for new builds and replace and upgrade of existing vessels.
Viking’s customers have announced significant new orders during the quarter, and expects higher business activities for the next few quarters with the increasing build-up of our order book from new projects and accelerated schedule from customers.
2. Having completed in February 2011 the relocation and integration of its business operations to a single facility, the Group expects to reap benefits as we streamline efficiencies further. In addition, the Group has begun exploring opportunities to jointly tender for projects.
Viking Offshore & Marine announced the disposal of 32m shares in United Envirotech Limited, raising about $9.7m in cash which will be utilized towards the repayment of loans and payables. This development is not surprising as the management has always reiterated its intention to dispose of its non-core assets. We believe that the company would realize a gain of a $5.8m, and the transaction will also help improve cash-flows.
However, due to a change in analyst coverage, we are still in the process of revising our estimates; hence, we are putting our Buy rating and S$0.31 fair value estimate under review
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