VARD closed with a spinning top @ S$1.005 (-0.01, -1%) on 25 Apr 2014.
Immediate support @ S$0.98, next support @ S$0.95, immediate resistance @ S$1.035.
Key resistance @ S$1.20, long term horizontal support @ S$0.79.
A break below S$0.79 is a continuation of the major strong downtrend.
Based on the Elliott Wave Chart Pattern, crucial support @ S$0.78, record low baseline support @ S$0.56; expect VARD to retest the last low @ S$0.76 scored on 22 July 2013 and hit lower low to close the gap between S$0.70 and S$0.675 created on 7 Oct 2011.
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VARD — The W-shaped reversal chart pattern on VARD is eerily similar to Dukang.
CIMB Daybreak - 27 June 2014
Vard Holdings Ltd (HD, TP:S$1.19) - Havyard IPO pricing does not inspire
Target S$1.19 (Stock Rating: HOLD)
Vard’s Norwegian peer, Havyard, has completed its Oslo IPO, following a cut in its IPO price (from NOK36/share to NOK33.50/share). The pricing implies a market cap of NOK755m, and values the stock at 5.4x CY13 P/E and 1.1x CY13 P/BV. In comparison, Vard trades at 14.8x CY13 P/E and 1.7x CY13 P/BV. While we think that a premium is warranted, the wide valuation gap does not inspire much confidence. We maintain our Hold rating as we think that an earnings recovery is priced in, while risk-reward looks to be balanced. No changes to our target price (still at 9x CY15 P/E, the mean since its IPO) and FY14-16 EPS. We will re-visit the stock on stronger margins and orders.
What Happened Havyard IPO pricing does not inspire. Havyard’s IPO consists of 4.2m existing shares sold by the current majority shareholder, Havila Holding AS. The IPO pricing values Havyard at 5.4x CY13 P/E and 1.1x CY13 P/BV. In comparison, Vard trades at 14.8x CY13 P/E and 1.7x CY13 P/BV.
What We Think Though we think that Vard deserves to trade at a higher premium (due to its scale and market leadership position), the wide valuation gap hardly inspires.
Havyard vs. Vard. Havyard is a high-end shipbuilder and designer. The big-4 OSV yards in Norway are Vard, Ulstein, Kleven and Havyard. Over the last three years, Havyard generated an average turnover of NOK1.7bn (15% of Vard's turnover) and achieved an average EBITDA margin of 13.7% (vs. Vard's 12.8%). At 1Q14, its shipbuilding order book stands at NOK2.9bn (13% of Vard's order book). Its net gearing stands at 0.5x vs. Vard's 1.2x.
Havyard’s declining margin caps optimism. Perhaps what is more unpropitious is Havyard's declining shipbuilding margins over the last three years, due to construction of riskier, prototype vessels. Typically, these vessels are subsea construction vessels. This point coincides with our argument that the impact of the product mix on Vard's margins is a tricky one to decipher (see overleaf for details). Vard’s order book is skewed towards subsea vessels.
What You Should Do With an earnings recovery priced in and risk-reward looking balanced, we advise investors to either trim or hold their positions.