Triyards Holdings - OCBC Research 2016-01-04: Diversifying customer and product mix

TRIYARDS HOLDINGS LIMITED RC5.SI

Triyards Holdings - Diversifying customer and product mix

 Gains new customers
 US$620m new orders in CY15
 Low net gearing of 0.3x

Triyards Holdings recently announced that it has clinched NT$716m (approx. US$21.8m) of new contracts to build two oil barges for a new customer, CPC Corporation.

CPC is a Taiwanese state-owned oil and gas company that supplies energy to its domestic market. The oil barges are intended for coastal service and the supply of bunker fuel to Taiwan’s harbour and coastal areas, and will be delivered in 2QFY18.
Recall that this follows on the back of a US$26.4m scientific research vessel order that was placed by the Taiwan Ocean Research Institute (announced mid Dec ’15), and illustrates Triyards’s efforts to diversify its product and customer mix.

With the recent orders, Triyards’s new order wins have totaled about US$620m in CY15, compared to US$170m in CY14 and US$120m in CY13.
We believe that this is one of the key reasons why the stock has performed relatively well vis a vis its other offshore marine (O&M) peers in terms of share price – the FTSE Oil and Gas index is down about 34% for the year, many O&M stocks are down 40-50%, while Triyards’s share price is down a more modest 13%.
As mentioned in our earlier 4 Dec ’15 sector piece “Patience needed; expect more trading opportunities”, Triyards was the second best performing stock in the sector for the year, just after Yangzijiang Shipbuilding.

The group has also reported relatively resilient earnings (2% FY15 PATMI growth) at a time when peers were reporting significant drops in earnings or even losses. This was also not at the expense of its balance sheet – net gearing fell from 0.5x in FY14 to 0.3x in FY15.
Meanwhile, the group’s net orderbook of about US$564m (comprises nine liftboats and other vessels like high speed craft and chemical tankers) provides earnings visibility to FY17.
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/ 2016-01-04

OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 0.61 Same 0.61