Triyards Holdings - OCBC Investment 2017-04-10: Core net profit flattish QoQ

TRIYARDS HOLDINGS LIMITED RC5.SI

Triyards Holdings - Core net profit flattish QoQ

Triyards Holdings reported flattish revenue of US$70.6m for 2QFY17 but saw a net loss of US$6.3m, dragged by US$8.4m of allowance for doubtful receivables (from related/affiliated entities of Ezra Holdings). Excluding this, we estimate core net profit to be about US$2.1m, similar to that in 1QFY17; 1HFY17 core net profit accounted for 46% of our full year forecast.
The allowance for doubtful receivables is not surprising given the state that Ezra is in; our 15 Mar 2017 report, “Awaiting Clarity” mentioned that we had estimated a net US$6.8m impact from balances due from/to related and affiliated companies on Triyards’s balance sheet.
We understand that Triyards is still receiving payment from LMC for the Libra turret work and there is still a small amount (both balances due to/from) left unimpaired in the balance sheet.

The group’s net order book stands at about US$321m, though we note that about US$175m of this relates to two un-built liftboats for Ezion that are at risk of cancellation or indefinite deferment.
Triyards also has four more liftboats that are at advanced stages of completion, with deliveries in the next six months.
Meanwhile, the group also announced new contracts of US$32.9m in Apr, including the fabrication of seven tugboats and one 16-metre aluminium crew transfer vessel from an established Vietnamese vessel owner and operator. These are due for delivery by 1QCY18, and we estimate gross margins of mid teens for the new contracts.

Looking ahead, we expect Triyards’s net gearing of 0.8x to remain at least at this level for the next quarter, till deliveries pick up, resulting in more cash inflows.
As for the US$30m max liability corporate guarantee the group has with Ezra, management updated that they have not received any requests from the three banks for payments so far.
We tweak our estimates, and rolling forward our valuations to FY17/18F, our fair value estimate slips to S$0.33 (based on 0.35x book).
Maintain HOLD pending more clarity regarding the impact from Ezra.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-04-10

OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.330 Down 0.345