Vard: Though the share price has corrected sharply over the last 12 months, DBSV believes sentiment may continue to be affected by further losses in the Brazilian yards, as well as lack of order wins.
Vard is a high-end OSV builder and customers may not be willing to invest in specialised vessels for deepwater applications unless oil price moves towards US$100/bbl again, which does not seem likely in the near to medium term.
Vard recently secured a contract for a diving support vessel, which was its first order win in FY15. Management has previously indicated that fierce competition for a limited number of specialised vessels has resulted in a very challenging environment, and Vard could well end up falling short of DBSV's NOK5bn new order win assumption for FY15.
DBSV maintains its FULLY VALUED rating with TP of $0.49, pegged to 0.8x FY15 P/B, which reflects the sub-par return (ROE) expectations of only 4-5% in FY15/16.
The current orderbook of NOK15b does underpin revenue visibility in FY15 but uncertainties linger due to a poor order win outlook, execution issues at the Brazilian yards and the weak Kroner.
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