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.

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.

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.

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.

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 | http://www.rhbinvest.com.sg/ 2016-01-12

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.94 Same 0.94