VARD Holdings reported a 26% YoY drop in revenue to NOK 3,302m and a net loss of NOK 83m in 4Q15, bringing full year net loss to NOK 603m. This compares to net profit of NOK 349m in FY14. The negative result for 2015 was caused by loss provisions related to projects at the Brazilian yards. The rest of the group contributed with a positive EBITDA, both in 4Q15 and on a full year basis.

There were also impairment charges of NOK 23m in 4Q15 related to assets in Vard Niteroi. Looking ahead, the group expects FY16 revenue to drop to between eight and nine billion NOK, with a positive EBITDA margin.

With the implementation of a new business plan, revenues are targeted to recover to previous highs of between 12 and 13 billion NOK by 2020, also on the back of an expected recovery of the offshore market from 2018. At S$0.137/share, the stock is now trading way below our earlier fair value estimate of S$0.31. As such, we put both our Sell rating and fair value estimate under review.

Source: OCBC Research - 29 Feb 2016