SINGAPORE (Nov 11): OCBC is maintaining its “sell” recommendation of Vard Holdings at a lower fair value of 31 cents as the builder of specialised offshore support vessels is likely to see a net loss in FY2015 and its Brazilian yards could see further impairments.

Vard Holdings this morning reported a 19% drop in revenue to NOK 2.27 billion ($374.4 million), while EBITDA before restructuring cost was –NOK 467 million in 3Q15, caused by loss provisions related to projects at the Brazilian yards.

Along with restructuring cost of NOK 36 million in the quarter, Vard saw a net loss of NOK 486 million in 3Q15 vs. a loss of NOK 37 million in 3Q14.

At the end of 3Q15, Vard’s order book amounted to NOK 14.01 billion, down from NOK 13.92 billion at end 2Q15.

In a Wednesday report, OCBC lead analyst Low Pei Han says looking ahead, the group’s core market for OSVs is likely to remain weak, especially for PSVs and AHTS vessels in the North Sea where many vessels have been laid up.

Low also says 2015 is now likely to be the group’s first year of loss after the 2008 financial crisis, given that VARD is facing a severe cyclical downturn in its core market and has to manage its troubled Brazil operations.

“As part of its strategy overhaul, Vard’s exposure to Brazil will be reviewed, leading to possible structural changes which could result in impairments,” adds the analyst, “Our fair value estimate drops from $0.41 to $0.31. Maintain sell.”

Vard is down 8.33% at 33 cents.