Triyards Holdings - RHB Invest 2016-01-12: Solid Start To The Year

Triyards Holdings - RHB Invest 2016-01-12: Solid Start To The Year TRIYARDS HOLDINGS LIMITED RC5.SI 

Triyards Holdings (ETL SP) - Solid Start To The Year 

  • Triyards’ 1QFY16 results were solid, with core PATMI surging 47% YoY, driven by strong revenue recognition. 
  • Maintain BUY with an unchanged SGD0.94 TP (92% upside). 
  • Its orderbook has leapt to yet another quarter-end record high of USD564m, providing visibility for another six quarters. 
  • We expect Triyards to continue winning non-oil & gas orders this year. 

 Starting the year on the right foot. 

  • Triyards’ 1QFY16 (Aug) revenue was USD93m, up 64% YoY as significant contributions from liftboats under construction kicked in. 
  • The gross margin was 18.4% this quarter, down from 22.9% a year ago due to a different product mix. 
  • Though the reported PATMI showed a 12% YoY decline, after excluding the USD3.9m negative goodwill gain in the comparable quarter, Triyards’ PATMI was actually up c.47%. 
  • The net gearing ticked up slightly, from 0.31x as at FY15 year-end to 0.38x in 1QFY16, as working capital requirements rose to sustain the higher construction revenue. 

 Record orderbook will drive earnings growth. 

  • Triyards’ net orderbook stood at USD564m, a new record. We believe that Triyards would continue to win non-oil & gas orders, eg oil tankers, specialised vessels, and perhaps even windfarm installation vessels. 

 Trading at 2.5x profits in the secured orderbook. 

  • Assuming a sustainable net profit margin of 8% (which was delivered this quarter), the USD564m orderbook implies a profit of c.USD45m. 
  • Triyards’ market cap is a mere USD111m, or only 2.5x the implied profits in the secured orderbook. We feel that this valuation is far too low. 

 Maintain BUY with unchanged SGD0.94 TP. 

  • We continue to value Triyards at SGD0.94 per share, based on 1.05x P/BV (at USD/SGD at 1.40, conservatively ignoring the recent USD strength). This valuation implies c.6.5x P/E. 
  • We feel that even a 1.05x P/BV valuation is highly conservative – the company is delivering c.15% ROE this year and the balance sheet is not over-leveraged unlike some of its peers. 
  • Triyards remains one of our Top Picks in the oil & gas sector.

Lee Yue Jer CFA RHB Invest | 2016-01-12
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.94 Same 0.94