-->

Maybank Kim Eng Research 2015-07-22: Vard Holdings - Another Tough Quarter. Maintain SELL.

Another tough quarter 


  • 2Q15 PATMI missed despite QoQ improvements. Operationally worse than 1Q15. 
  • Weak EBITDA margins of 1.8% as Brazil still nursed losses. Expect weak order intake to hurt utilisation further. Cut EPS by 11-15% for lower margins & utilisation. 
  • Reiterate SELL with above de-rating catalysts. GGM TP still at SGD0.35, even after rollover to 0.55x FY16 P/BV. No dividends expected in FY15 for the third consecutive year. 


What’s New 


  • 2Q15 PATMI of NOK58m (-59% YoY, -163% QoQ) improved from a net loss of NOK92m in 1Q15, but still missed expectations. 
  • 1H15 bottom line was a net loss of NOK34m against our Street-low profit forecast of NOK161m for FY15. 
  • Operationally, 2Q15 was worse off, as 1Q15 was dragged down by NOK207m of net forex losses. 
  • Brazil continued to lose money on slower-than-expected construction progress. 
  • EBITDA margins dipped to 1.8% (1Q15: 2.1%, 2Q14: 6.4%), reflecting weaker execution. 


What’s Our View 


  • YTD order intake amounted to NOK1.2b against our NOK4.1b for FY15 (FY14: NOK9.5b). 
  • We cut FY15/16 assumptions further from NOK4.1b/10.0b to NO3.5b/7.9b. 
  • This could affect yard utilisation and earnings, unless there is a surprise uptick in orders or a strong turnaround in Brazil. 
  • Vard previously guided for broadly similar EBITDA margins as FY14’s 3.3% but we believe it would fall short, going for just 2.3%. 
  • Consequently, we cut FY15-17 EPS by 11-15%. 
  • We also think that Vard may not be able to afford dividends again this year as its cash has been depleted from NOK2.0b in Dec 2014 to NOK904m at end- 2Q15. 
  • We expect negative FCF. 
  • TP of SGD0.35 is unchanged even as we roll forward to FY16, still at 0.55x P/BV based on GGM. 
  • Reiterate SELL.


(Yeak Chee Keong, CFA)

Source: http://www.maybank-ke.com.sg




Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......