Vard

Vard: Expects a negative EBITDA for 3Q14 due to cost overruns arising from two vessels being outfitted at Vard Niterói, as well as slower-than-expected improvements in throughput and productivity at the new shipyard in Brazil, Vard Promar. The negative outlook on oil prices may be discouraging deepwater investments, which Vard specialises in. Going forward, this may lead to a cut in capex by upstream oil majors, translating into margin pressure for Vard, weighed by lower deepwater charter rates, utilisations and asset prices. Trading at 9.4x forward P/E, we notice several houses changing their negative call on the counter due to the hard-to-ignore valuations. However, we opine that with the current negative sentiments overshadowing the O&M sector, investors may be better off looking for investments in operationally sound competitors. Vard will be releasing its 3Q results on 11 Nov before market commences trading.