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Vard Holdings - Not out of deepwaters

Shared By Stock Fanatic on Monday, March 2, 2015 | 2.3.15

■ FY14 beat on exceptionally high revenue, but 4Q14 EBITDA margins of 2.7% missed. No final DPS.

■ FY15E orders likely to be weak. Cut EPS by 6-12% for this.

■ Maintain HOLD for lack of catalysts. TP now at SGD0.60, 0.9x FY15E P/BV, from SGD0.65.

Underlying metrics below
FY14 PATMI of NOK349m (+0.3% YoY) beat, at 115%/109% of our/consensus forecasts. This was aided by exceptionally high 4Q14 revenue recognition of NOK4,500m (+45.5% YoY, +60.2% QoQ), but underlying challenges remained. 4Q14 EBITDA margins improved QoQ but were still feeble at 2.7%. This took FY14 margins to 3.3% vs our 4.1%. Additional provisions were also booked for Promar LPG projects. Vard also raised useful lives for its new yards from 15 to 25 years, lowering depreciation. No dividends have been declared for the second straight year.

Still-murky waters; Maintain HOLD
We expect weak orders in FY15 given its exposure to sophisticated deepwater vessels. We now forecast FY15E/16E order wins to be NOK6.1b/10.0b from NOK8.4b/8.4b. A net orderbook of NOK17.7b as at end-2014 should support this year, but will be depleted if there are no or weak new orders. Its saving grace could be recovering margins in Brazil.

Romania and Norway yard utilisation could drop in 2H15. Vietnam’s, on the other hand is highly utilised. Margins could surprise positively with its resolution of Brazilian cost/execution hiccups. Net gearing surged to 1.8x from 1.1x in FY13, after it took on more construction loans.

Technical Analysis
Daily Chart
We cut FY15E-16E EPS by 6-12% for lower order intakes. We now value Vard on 0.9x FY15E P/BV, from its 1.0x trough previously, in our GGM (ROE 8.5%, cost of equity 9%). This translates into a new TP of SGD0.60, down from SGD0.65. Maintain HOLD. (Read Report)

Read Related Reports
Vard Holdings - Not out of the woods yet
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- DBS Group Research
Vard Holdings - Valuations High Even On Optimistic Forecasts
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- DMG/OSK Research
Vard Holdings Ltd - Earnings in dry dock
Friday, 27 February 2015
- CIMB Research

Source : Maybank Kim Eng Research

Posted on Monday, March 2, 2015 | 2.3.15
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