VARD issued a profit warning stating that it expects Q213 net profit to be lower than current consensus market estimates. Further delays and cost overrun at the Niteroi yard in Brazil resulted in additional cost in outsourcing.
Our view has been to look beyond FY2013F for the recovery growth in FY2014F. While our FY13F forecast is lower than consensus, our initial assessment after our call with management is that FY2013F net profit could be even lower than our expectations. We cut our FY2013F/2014F/2015F net profit forecasts by 19 per cent/5 per cent/3 per cent, respectively. Brace for a roller-coaster ride in share price in the short term, but we maintain our view that better-than-expected order wins will drive FY2014F recovery and valuations at current levels are still unjustifiably low after our earnings cut.
TP thus falls to S$1.52, still pegged to 9x PE ratio on average of FY2013-2015F earnings.
BUY
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