VARD HOLDINGS LIMITED
MS7.SI
Vard Holdings - BRAZIL OPS LIKELY TO BE OVERHAULED
• 2015 likely to see net loss
• Brazil yards could see impairments
• Still a SELL
Net loss of NOK 486m in 3Q15
- VARD Holdings reported a 19% YoY drop in revenue to NOK 2.27b, while EBITDA before restructuring cost was -NOK 467m in 3Q15, caused by loss provisions related to projects at the Brazilian yards.
- Along with restructuring cost of NOK 36m in the quarter, VARD saw a net loss of NOK 486m in 3Q15 vs. a loss of 37m in 3Q14. This was below our expectations but less of a surprise after VARD’s earlier profit warning.
Targeting other segments like fisheries
- At the end of 3Q15, VARD’s order book amounted to NOK 14.01b, down from NOK 13.92b at end 2Q15.
- YTD, new order intake has totalled NOK 2.64b, lower than NOK 9.45b in 2014.
- Looking ahead, the group’s core market for OSVs is likely to remain weak, especially for PSVs and AHTS vessels in the North Sea where many vessels have been laid up.
- Currently, project opportunities are mostly related to light construction vessels, and in other geographical areas. Other specialised vessels segments may also present opportunities, but the market is fragmented and competitive.
- Meanwhile a new vessel design series targeting fisheries and aquaculture has been launched.
May see Brazil yard impairments
- 2015 is now likely to be the group’s first year of loss after the 2008 financial crisis, which is not surprising given that VARD is facing the dual challenge of
- a severe cyclical downturn in its core market, and
- having to manage its troubled Brazil operations.
- As part of its strategy overhaul, VARD’s exposure to Brazil will be reviewed, leading to possible structural changes which could result in impairments; as at end 3Q15, NOK 950m of its NOK 2,368m PPE was related to Brazil.
- Given the dim earnings outlook, we switch our valuation to a 0.65x FY16F P/NTA valuation (taking into account current low industry valuations and potential impairments ahead), such that our fair value estimate drops from S$0.41 to S$0.31.
- Maintain SELL.
Low Pei Han CFA
OCBC Securities
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http://www.ocbcresearch.com/
2015-11-11
OCBC Securities
SGX Stock
Analyst Report
0.31
Down
0.41
