Triyards Holdings - RHB Invest 2015-11-18: Climbing To a Higher Peak

Triyards Holdings - RHB Invest 2015-11-18: Climbing To a Higher Peak TRIYARDS HOLDINGS LIMITED RC5.SI 

Triyards Holdings (ETL SP) - Climbing To a Higher Peak 

  • Triyards has won a USD12.8m contract for four ASD tugboats, to be delivered in 2017, marking its entry into a new product range for a new customer. 
  • Maintain BUY with a SGD0.94 TP (135% upside). 
  • This takes its orderbook to USD577m. Triyards’ ability to maintain its order win momentum underpins our confidence in its long-term prospects. 
  • It is also one of the few companies in the sector with a growing earnings profile. 

 New product range for new customer. 

  • The four RAstar 3400 Azimuth Stern Drive (ASD) tugs are designed for escort operations in adverse sea and weather conditions. 
  • The customer is a Singapore-based international specialist marine craft group. 
  • We view the continuing diversification of Triyards’ order book and product range as a positive development, providing increasing flexibility that enables it to weather the downturn in the oil & gas space. 

 Margins likely higher than average. 

  • The USD12.8m price tag excludes owner-furnished equipment. 
  • Since engineering and fabrication work typically yield higher margins than procurement, the lower quantum of procurement in these contracts implies higher-than-average margins for the contracts overall. 

 Orderbook finds a higher peak. 

  • With this win, Triyards’ orders on hand hit another record high of USD577m. 
  • This provides c.1.5 years of revenue visibility, which is comparable to the orderbook of large-cap Keppel Corp (KEP SP, BUY, TP: SGD10.00). 

 Likely the most clearly undervalued stock in the sector. 

  • We maintain that Triyards’ valuations have been dragged down by concerns over its parent Ezra (EZRA SP, TRADING BUY, TP: SGD0.33), which we believe are similarly overdone. 
  • Triyards is operationally independent of Ezra, with negligible inter-company balances and < 2% orderbook exposure. 
  • At 0.4x P/BV and 2.7x FY16F P/E, this stock is likely the most under-valued in the offshore oil & gas space in Singapore. 
  • Our TP is based on a 1.05x current P/BV multiple, which we believe conservatively values its 14-15% ROEs and growing earnings.

Lee Yue Jer CFA RHB Research | http://www.rhbinvest.com.sg/ 2015-11-18
RHB Research SGX Stock Analyst Report BUY Maintain BUY 0.94 Same 0.94