Reiterate Buy, order intake to gather pace in 2H13. Vard’s share price is off its low of SGD1.015 following an unwarranted selldown previously. While there are some easing of concerns over margins and order intake, further rerating would need to be triggered by real order wins which we believe would gather pace towards 2H13. Vard has the most attractive valuations among the O&M stocks under our coverage, trading at 5.8x FY14F PER, 5-6% forward dividend yields and FY13- 15F ROEs of >25%. Reiterate Buy and TP of SGD1.65.

Buildup of activities in the North Sea. Optimism expressed by leading OSV owners following their 1Q13 results generally support our view that high end OSV newbuild ordering is on the verge of picking up again in 2H13. GulfMark Offshore remarked that North Sea fixtures are being set at higher-than-expected levels. Tidewater Inc.’s recent acquisition of Troms Offshore to expand into the Norwegian market reflects their view on the long term attractiveness of the North Sea market. Average utilisation and charter rates for AHTSs and PSVs are generally rising although there are still occasional bouts of volatility. An oversupplied order backlog may still hinder new orders but that should ease as most vessels get delivered in 2013. Solstad believes that there are opportunities for AHTS and PSV orders to surprise on the upside this year.

New rigs entering the market warrants more support vessels. A common notion brought up by the OSV owners is that a large number of rigs (>50) entering into service over the next 12 months would warrant the need for more support vessels. We concur with this view which is consistent with rig delivery schedules of Singapore rigbuilders under our coverage.

Construction vessels market still steady. The subsea construction market is still strong and Solstad believes that it is underpinned by solid fundamentals and limited availability of modern and large construction vessels. A batch of pipelay vessel orders from Petrobras potentially worth NOK3b is still in the cards which would be a bonus to our expectation of NOK11.5b in new order wins for Vard this year. The award could be near as Petrobras has recently been returning to the market to issue tenders which have been outstanding since 2012.

Source: Maybank Kim Eng Research - 24 Jun 2013