Vard

Vard(S$0.245) Another contract termination casualty in O&M

Vard Promar, a 50.5%-owned subsidiary of the group, received termination notice from Petrobras Transportes (Transpetro) for two liquefied petroleum gas (LPG) carriers.

The vessels are among the last two of a series of eight carriers which Brazilian-based Transpetro ordered from Vard Promar for US$536m in Jun ’10, and were scheduled for delivery between 2014 and 2016.

While the group plans to pursue compensation for the termination of contracts, it is also reviewing its overall exposure to the Brazilian market, where Transpetro’s parent, state-backed Petrobras is hard hit by depressed oil prices and entangled with corruption scandals involving local politicians and businessmen.

The turbulent oil market took its toll on Brazil, as the world’s seventh-largest economy slipped into recession in 2015 with soaring unemployment, as well as losing its investment grade credit rating from S&P rating agency.

Maybank-KE has a sell rating on Vard, with a TP of $0.22.