Triyards Holdings - OCBC Research 2015-12-04: Second Best Performing Stock In Sector

Triyards Holdings - OCBC Research 2015-12-04: Second Best Performing Stock In Sector TRIYARDS HOLDINGS LIMITED RC5.SI 

Triyards Holdings - Second Best Performing Stock In Sector 

 Good relative share price performance 
 Healthy earnings 
 US$564m net order book 

Second best performing stock in sector YTD due to healthy earnings… 

  • At a time when many offshore & marine stocks are down 40-50% YTD, Triyards Holdings fell a more modest 15% YTD, making it the second best performing stock in the sector, after Yangzijiang Shipbuilding. 
  • This can be attributed to Triyards’s relatively resilient earnings (2% FY15 PATMI growth) as it executed on its orderbook; recall that Triyards achieved net profit of US$27.2m in FY15, which was spot on compared to our forecast. 
  • This was also not at the expense of its balance sheet – net gearing fell from 0.5x in FY14 to 0.3x in FY15. 

… and continued order wins 

  • Encouragingly, the group also continued to win orders throughout the year, including five liftboats and other types of vessels like high speed craft and chemical tankers. Indeed, new order wins have totaled US$550m so far, providing earnings visibility to FY17. 
  • In comparison, CY2014 saw new orders of US$170m. 

US$564m net order book relatively diversified 

  • Triyards’s net order book currently stands at about US$564m, which comprises nine liftboats and a good mix of other kinds of vessels as the group expands its product lines. 
  • We view this favourably, as the liftboat is still a relatively bright spot in the current tough environment, while the other products (e.g. fast craft vessels) are not dependent on the oil and gas industry. 
  • Looking ahead, Triyards expects to spend ~US$20m on capex. 
  • Spare capacity in its three Vietnam facilities range from 30-35%, and the group has also utilized neighbouring yards for certain work during peak seasons. 
  • We remain positive on the group’s prospects as it has established itself as a specialist liftboat provider in the region, though we note increasing competition from other yards as they seek to enter the liftboat space. 
  • Maintain BUY with S$0.61 fair value estimate, based on an undemanding 5x P/E on FY16 earnings.

Low Pei Han CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-12-04
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 0.61 Same 0.61