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...how strong is the support at current level $1.100...???????... seems okay.....????????....
Relax good news is on its way this month
Relax.. Good stock need time to chiong. If too fast is over speculated.. Holiday coming shld buy more
have patience.
like more buy then sell. but holiday coming don't know wan profit take first
Looks weak.....is better to sell abit...
waiting for 1.2
slowly marching up.the stairs
Expect more contracts awards announcement this month
First resistance 1.17
Varding now...
Vard earning for 4QY2012 is 16cts...
Based on Standard Chartered calculation should be...
Bear/Base/Bull = PE 6/8/10 should be
0.96 / 1.28 / 1.60
Well, SC said their forecast is 0.8 off the street, so based on street forecast we should see these range
1.2 (bear) / 1.6 (base) / 2.0 (bull)
Whatever the case, investors should be prudent and be wary of the range for VARD. Based on Friday close of $1.12, we should be at the bear part of the range and not base as forecast by SC. Look out for more contract win and the delivery of the final (loss making) vessel from the old Brazil yard. This will have a positive effect on the stock price...
Standard Chartered Research
Singapore l Oil Equipment, Services & Distribution 16 May 2013
VARD Holdings
IN-LINE (unchanged)
PRICE as of 15 May 2013:- SGD 1.12
PRICE TARGET:- SGD 1.15
A year of challenges
We lower our price target on VARD Holdings to SGD 1.15 (based on 8.0x 2013E PER) from SGD 1.30 (based on 9.0x 2013E PER), on lacklustre growth in 2013E/14E.
VARD‟ s 1Q13 EPS was below our conservative forecast, and we do not expect major margin improvement in 2013.
Better financing terms offered to clients and higher capital expenditure will result in negative FCF in 2013, in our view hence, we cut 2013E dividend payout to 35% from 40%.
Management appears confident that new orders will stay healthy the orders YTD represent 32% of our 2013 forecast of NOK 12bn.
Margins to be under pressure in 2013. We revise down our price target to SGD 1.15, based on 8.0x 2013E PER, which is the stock‟ s average valuation since its listing in late-2010. VARD‟ s 1Q13 earnings fell 30% YoY, missing our conservative forecast. Our 2013-14E EPS are 8-12% below the Street. The stock‟ s yield of c.5% and relatively undemanding valuations may provide support around current levels. We currently model a 2013E EBITDA margin of 11.1%, compared with the Street‟ s 11.6% (12.5% two months ago), while our revenue forecast is c.5% lower. We believe VARD in one of the top design-builders of large and complex support vessels. However, it is facing industry headwinds, such as labour issues in Brazil and weak demand for two out of three main vessel categories – platform supply vessels (PSV) and anchor handling tow supply (AHTS).
OSCV demand still healthy. Demand for offshore construction vessels (OSCVs) continues to be robust, while those for PSV and AHTS remain soft. Five of the past 10 orders have been OSCV-related. By value, OSCVs represent 75% of the orders secured YTD. These vessels are used in constructing production platforms, laying pipelines and installing a variety of subsea infrastructure. We estimate that VARD will require NOK 12bn in new orders in 2013 to maintain optimal utilisation, and YTD orders represent one-third of this target.
Free cash flow turns negative. We model a negative FCF of NOK 990mn for 2013, versus a positive FCF of NOK360mn previously, due to higher capital expenditure and a more competitive landscape. VARD now extends a higher proportion of financing to clients by collecting 90% (versus 80% earlier) of the vessel value on delivery. In our view, the higher capital expenditure will be beneficial for its Vietnam and Romanian yards over time as productivity and capabilities improve.
Valuations
Price target methodology
Our SGD 1.15 price target is based on 8.0x 2013E PER, which is VARD‟ s average one-year forward PER since its listing in late-2010. This implies a 2013E PBR of 1.7x, which appears supported by the forward ROE of c.22%. The stock has largely traded between 6x to 11x forward earnings over the past two years. The Street has a price target of SGD 1.45 (according to Bloomberg). Our 2013E EPS is approximately 8% below the Street‟ s, due to lower revenue and margin assumptions.
Fig 1: Fair value scenarios – bull, base and bear cases
Fair value 2013E PER (x) Catalysts
Bull case 1.45 10.0 2013 new orders > NOK 12bn or EBIT margin > 12%
Base case 1.15 8.0
Bear case 0.85 6.0 2013 new orders < NOK 11bn or EBIT margin < 11%
Source: Standard Chartered Research estimates
so many profit taking today
The Good:
New orders secured have much higher value than estimated: VARD disclosed that the value of the 3 new vessels secured in 1Q13 is NOK2.8bn. If MER adds the other 3 orders that VARD has won in April and May ’13, the value of the 6 new orders goes up to ~NOK5bn, much higher than what MER had expected.
Solid order book of NOK15.5bn and 46 vessels: Order book is ~NOK17bn including 3 vessels in April and May, providing profit visibility of 1.5-2 years.
Main yards in Norway and Romania running 100% utilization: Given the large orders this quarter, the brief period of under-utilization in 4Q12 is over.
New investments in Romania and Vietnam to increase capacity: The new management is already in full gear with yards being enhanced to be able to take larger and more complex vessels.
2nd Brazil yard on track to commence operations by June 2013: The yard is 85% complete and ready to execute and target orders from Petrobras.
The Bad:
EBITDA margin of 11.1%, as expected: Margin came in at the mid point of the company’s long term guidance of 10-12%. With the Brazil yard issues expected to come under control by 2H13, MER thinks margins will improve.
Looking forward:
45% of MER’s and street’s order inflow estimate already achieved VARD set to surprise: Large Petrobras orders are on the horizon. In addition, the anchor handling tug supply vessel market is picking up. MER thinks that the street will have to gradually upgrade its order inflow numbers, which will lead to higher margin and profit estimates.
Action and recommendation
Order inflow strength and positive impact from new owner being ignored Stock set for re-rating: The new management seems to be completely focused on helping VARD grow through new orders, new customers and expanded capacity. MER believes there is unjustifiable negativity built around the stock leading to extremely cheap valuations of 6x 2014E price to earnings.
New orders secured have much higher value than estimated: VARD disclosed that the value of the 3 new vessels secured in 1Q13 is NOK2.8bn. If MER adds the other 3 orders that VARD has won in April and May ’13, the value of the 6 new orders goes up to ~NOK5bn, much higher than what MER had expected.
Solid order book of NOK15.5bn and 46 vessels: Order book is ~NOK17bn including 3 vessels in April and May, providing profit visibility of 1.5-2 years.
Main yards in Norway and Romania running 100% utilization: Given the large orders this quarter, the brief period of under-utilization in 4Q12 is over.
New investments in Romania and Vietnam to increase capacity: The new management is already in full gear with yards being enhanced to be able to take larger and more complex vessels.
2nd Brazil yard on track to commence operations by June 2013: The yard is 85% complete and ready to execute and target orders from Petrobras.
The Bad:
EBITDA margin of 11.1%, as expected: Margin came in at the mid point of the company’s long term guidance of 10-12%. With the Brazil yard issues expected to come under control by 2H13, MER thinks margins will improve.
Looking forward:
45% of MER’s and street’s order inflow estimate already achieved VARD set to surprise: Large Petrobras orders are on the horizon. In addition, the anchor handling tug supply vessel market is picking up. MER thinks that the street will have to gradually upgrade its order inflow numbers, which will lead to higher margin and profit estimates.
Action and recommendation
Order inflow strength and positive impact from new owner being ignored Stock set for re-rating: The new management seems to be completely focused on helping VARD grow through new orders, new customers and expanded capacity. MER believes there is unjustifiable negativity built around the stock leading to extremely cheap valuations of 6x 2014E price to earnings.
...one solution is not to put all eggs in one basket ie diversify... any other solution.... thinking.....
if it's accounts are doctored then no matter how analysis you put in also no use..
just like gaoxian..doctored accounts..inflated everything.. sales revenue profits etc
guoyanyunyan ( Date: 17-May-2013 11:43) Posted:
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...to read and understand financial statement is one of the important skill among other to equip in order to spot a good stock....right...?...
gaoxian had an outstanding balance sheet and many were duped into their doctored accounting .. no one saw it coming
unifibre had holdings of poh lian which is under liquidation, even tho they announce RTO listing from Sinar Mas..
very unfortunate..
For 2013 i've made a new approach to stock investing, after receiving guidance from a very reputable & experienced fund manager in Australia. He has taught me the basics of stock investing, which is to find value companies trading below their worth.
rabbitfoot ( Date: 17-May-2013 11:22) Posted:
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More and more buy calls from analysts. The next price catalysts will be more announcements of contracts awards.