Towards Financial Freedom

Vard Holdings - No Summer Break For Vessel Orders

kiasutrader
Publish date: Mon, 09 Jun 2014, 10:21 AM
Vard announced  up to four contracts in the space of a week, bringing YTD  order  wins  to  about  NOK8.4bn  of  our  NOK14.5bn  FY14  forecast. While the order pace is strong, we caution investors that ordering tends to  be  lumpy  and  that  near-term  earnings  are  not  expected  to outperform.  With  the  higher  visibility  of  earnings,  we  raise  our  TP  to SGD1.10 (from SGD1.00) but maintain our NEUTRAL call.
  • Two  platform  supply  vessels  (PSVs)  with  one  option.  On  2  June, Vard  announced  letters  of  intent  from  Nordic  American  Offshore  (NAO NS, NR)  for two PSVs of Vard 1 08 design to be delivered in 2Q/3Q15. There is an option for a third vessel, valid till end-July.
  • One  hybrid  construction/anchor-handling  vessel.  Vard  announced on  4  June  that  it had  secured  a  contract  for  one  offshore  construction and  anchor  handling  Vessel  for  Rem  Offshore  (REM  NO,  NR)  with  a value  of  about  NOK800m.  This  is  a  fairly  complex  vessel  with  a  400-tonne  bollard pull, an active heave compensated offshore crane with a 3,000m  range  and  150-tonne  rating,  and  ICE-1B  and  winterisation notation.  It  also  incorporates  a  launch  and  recovery  System  for  a remotely-operated vehicle (ROV). The vessel will be delivered from Vard Brattvaag in Norway in 1Q16,  with the hull fabricated  by  Vard Tulcea in Romania.
  • No summer break for orders. YTD, Vard has won about NOK8.4bn of orders by our estimate, meeting 58% of our FY14 forecast. While this is a fairly rapid pace of order wins, we caution that orders tend to be lumpy in nature and are not generally amenable to straight-line projections.
  • Maintain  NEUTRAL  with  higher  SGD1.10  TP  (from  SGD1.00).  We raise our TP to SGD1.10, which is based on a higher 12x P/E (from 11x),as  we  find evidence  of  a  general  undersupply  situation in  the  offshore support  vessel  (OSV)  market (see our 28 May report  Shallow Water Is The  New  Onshore).  However,  we  caution  that  2Q14  earnings  may disappoint the raised expectations implicit in Vard's higher share price, which has recovered 40% from the trough. Maintain NEUTRAL.







Source: OSK-DMG
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