Vard Holdings

Vard Holdings reported uninspiring 1Q14 results with net profit at NOK92.0m (-51%) on revenue of NOK2.7b (-3%). EBITDA margins ticked upwards for the third consecutive quarter ending at 6.4%, against a high EBITDA margin of 11.1% for 1Q13, resulting in a 55% decline in operating profit to NOK123m. The quarter was characterized by an exceptionally high order intake in respect of new builds (eight vessel contracts worth NOK5.5b), with three of these for the shipyard in Vietnam, improving yard utilization and extending the orderbook there into 2016. Operations in Norway and Romania remained stable, while the Brazil operations continue to be a focus area. Going forward, Vard remains positive on its order activity for FY14, but also considers the order intake in 1Q14 to be exceptional. VARD expects to see continued strong demand from the subsea support and construction vessel segment despite concerns of rising production cost in the O&G industry, and believes there will be incremental growth opportunities from new business developments. Vard’s total order book currently stands at NOK21.8b (vs NOK19.4b as at end FY13), which underpins topline visibility for the next 2 years. At current price, Vard trades at 9.8x forward P/E and 1.46x P/B. Latest broker ratings: OCBC places its Hold rating and TP of $0.84 under review