Towards Financial Freedom
Vard Holdings - No Summer Break For Vessel Orders
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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