VARD HOLDINGS LIMITED
MS7.SI
VARD Holdings - Net Loss Of NOK 69m In 2Q17
- Few surprises.
- Varying workload across yards.
- Cease coverage.
Results within expectations
- VARD Holdings saw a 4% YoY fall in revenue to NOK 2,128m and an operating loss of NOK 4m in 2Q17, leading to a net loss of NOK 69m for the quarter. This is similar to 2Q16, when the company reported net loss of NOK 67m then.
- Results were within expectations, with 1H17 revenue and net loss accounting for 51% and 58% of our full year estimates. Compared to 1Q17, revenue was 20% higher but net loss was wider; 1Q17 saw net loss of NOK 25m.
Operational updates across geographical regions
- In Norway, the design and procurement phases for cruise projects are on track, and the focus is on mobilizing adequate resources and strengthening cooperation with Fincantieri. Meanwhile, Vard Brevik is developing LNG-related business opportunities.
- In Romania, the phase of new investments at Vard Tulcea is close to completion, while Vietnam continues to see stable operations.
- In Brazil, the group now has full control of Vard Promar, providing for an amicable termination of the partnership with PJMR.
- Overall, the key operational challenge for the near term is managing varying workload across the different yards – “very high utilization” in Romania, low and variable load in Norway, and decreasing workload in Brazil.
- Meanwhile, risks relating to the offshore project portfolio remains (nine offshore vessels out of 44 vessels in order book). The group also has three offshore vessels (2 PSVs, 1 DSV that is ex-Harkand) in its balance sheet but these are not under the orderbook.
Cease coverage
- At the end of 2Q17, the order book was NOK 12.88b, up from NOK 12.65b at the end of 2016.
- Looking ahead, the group will continue to focus on its product portfolio diversification.
- Meanwhile the LOI for one exploration cruise vessel (signed in Jan 2017) has expired without resulting in a firm contract. The fisheries and aquaculture markets continue to see high activity, but competition is also strong.
- With a reallocation of resources, we are ceasing coverage on the stock.
Low Pei Han CFA
OCBC Investment
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http://www.ocbcresearch.com/
2017-07-26
OCBC Investment
SGX Stock
Analyst Report
99998
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