Target Price: SGD1.10
NOK800m OSCV Order From Farstad
Vard won a NOK800m (USD131m) repeat order from Farstad for an offshore subsea construction vessel (OSCV), bringing its YTD order win to NOK11.3bn. We maintain our EPS estimates but see some upside risks to our new order forecast of NOK12bn. We like Vard for its strong positioning in building high-end offshore support vessels (OSVs) and its attractive valuations at 7.4x FY14F P/E and EV/EBITDA of 3.9x.
• Rising orderbook erases concerns on visibility. We estimate that the new order lifted Vard’s YTD order win to NOK11.3bn – accounting for 94% of our FY13 forecast of NOK12bn – and unbilled orders to NOK21.2bn (USD3.48bn). Vard has secured NOK7.3bn worth of new orders in August alone compared with NOK4bn in 1H2013. Investors were concerned about the company’s thin orderbook when its 2Q13 results were announced but recent announcements should put their concerns to rest
• Repeat order likely to carry better margins. We are positive on this order as it is a repeat order with Vard’s own design. A similar unit was ordered by Farstad in Feb 2013 and scheduled for delivery in 1Q2015. The latest order will be built based on VARD 3 07 design with a total length of 143 metres, beam of 25 metres and deck space of more than 1,800 sq m. The vessel can carry three remote operating vehicles (ROVs) and accommodate 130 people. The hull will be fabricated in Vard Tulcea in Romania and we expect the final delivery from Vard Langsten in Norway in 3Q2015.
• Maintain BUY, with SGD1.10 TP. We value the stock at a 10x FY14F P/E. The key catalyst is the potential recovery in margin from the lows in 2Q2013. Key risks are further delays and poor cost control in Brazil.