Vard Holdings

Vard Holdings: CIMB maintains O/p with $1.40 TP. House hosted Vard in a non-deal roadshow in KL, where investors wanted to know the potential synergies between Vard and Fincantieri. Grp suggested that there could be numerous joint business opportunities, including a cross-selling of designs; collaboration between the two companies’ marine system businesses and a bigger customer base. Vard’s roadmap, management team and group structure will remain the same. Other topics included margins, Brazilian operating conditions, order outlook and dividend policy. House note that in terms of technology, markets and culture, see Fincantieri as a much better fit for Vard than its previous parent, the STX Group. Also, Fincantieri has greater vested interests in the future growth of Vard while the STX Group was only interested in selling the co in the later years of ownership. On margins, Vard remains conservative, though it believes that operations should stabilise by year-end. CIMB expect margins to improve in 2014 from a scaling of the learning curve for Transpetro orders as well as investment initiatives for its Romanian and Vietnamese yards. Additionally, Vard was markedly positive on its order outlook. Stronger orders and toplines could compensate for lower margins. Overall, with the stock trading at 7.4x FY14 P/E and 4.3% dividend yields, investors agreed that the stock is cheap, against local OSV companies. Vard is house top pick among small/mid-cap O&M stocks.