vdm rated a buy by rbs morgans

James Wilson - Senior Resources Analyst, RBS Morgans

VDM Group (VMG) - Speculative buy
VMG would appear to be one of the cheapest stocks in the mining services sector trading at half net tangible asset backing. Short term (three months) there is potentially more bad news than good including possibility of provisions on legacy contracts, downgrades to consensus forecasts and bank refinancing risk which is why, in our view, it is trading at such a deep discount. However, the industry outlook remains very buoyant, the tender book continues to grow and the company is under new management. Medium- to long-term, if bank debt is repaid through sale of property, the order book replenished and contracts executed at acceptable margins the value of the company will be multiples of what it is today.