Wednesday, February 12, 2014

VARD - Bourbon Places Newbuild Order (DMG)

Target Price: SGD0.85
Price: SGD0.82
Bourbon Places Newbuild Order

VARD announced last Friday that it has won an order for an Arctic anchor handling tug and supply (AHTS) vessel from Bourbon (GBB FP, NR) – the second newbuild order announced so far this year. The vessel, based on VARD’s own design, is expected to be ready by 2Q16.

We estimate the company has won NOK1.75bn worth of new orders YTD. This makes up 15% of our FY14 estimate. Maintain NEUTRAL, with a SGD0.85 TP.

■ Lands this year’s second newbuild order
The newbuild Arctic AHTS, to be built on VARD’s design, is 93.6 meters long, and has a beam of 24 meters and a bollard pull of approximately 270 tonnes. Although the company did not disclose the contract value, we estimate it at about NOK750m. Together with a diving support and construction vessel ordered by an undisclosed customer that was announced on 15 Jan, we estimate that VARD has bagged NOK1.75bn worth of orders YTD.

■ Newbuild demand likely to stay strong
The robust demand for offshore support vessels (OSVs) is supported by higher offshore drilling activities and project developments. We estimate that 73 newbuild drillships will be added to the global fleet in the next six years up to 2020, and assuming a vessel-to-rig ratio of 2x, the market will require 150 deepwater vessels in total.

■ Pressure on margins from Brazil to extend until early 2015
We expect the company’s FY14 EBITDA margins to be around 8%, as the outstanding projects in Brazil will continue to drag on overall profitability.

■ Maintain NEUTRAL, with SGD0.85 TP
We maintain our FY14F-15F EPS estimates as we have factored in NOK12bn in new orders for 2014. Our TP is based on a 10x FY14F P/E. For exposure to OSV builders, we prefer Nam Cheong (NCL SP, BUY, TP: SGD0.45) over VARD.

Source/Extract/Excerpts/来源/转贴/摘录: DMG-Research,
Publish date: 10/02/14

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