Triyards Holdings - OCBC Investment 2017-07-24: Net Loss Of US$63.3m In 3QFY17

Triyards Holdings - OCBC Investment 2017-07-24: Net Loss Of US$63.3m In 3QFY17 TRIYARDS HOLDINGS LIMITED RC5.SI

Triyards Holdings - Net Loss Of US$63.3m In 3QFY17

  • Cost overruns.
  • US$45.1m asset impairment.
  • US$140-160m net orderbook.

First gross loss since listing in 2012… 

  • Triyards Holdings saw a 62% YoY drop in revenue to US$30.9m and a gross loss of US$10.3m in 3QFY17, marking the first quarter of gross loss that the group incurred since its listing in 2012. 
  • It also suffered a US$45.1m allowance for impairment of assets, leading to a net loss of US$63.3m for the quarter. Stripping this out, we estimate core net loss of about US$18m. 
  • The gross loss was due to 
    1. lower revenue in the quarter, affected by the delay in delivery of two MPSVs on owners’ requests, 
    2. cost overruns for the chemical tankers project, and 
    3. compressed margins under a competitive environment. Management is seeking recourse from parties for the chemical tankers project, in the hope of some compensation subsequently.

… dragged by US$45.1m impairment 

  • For the US$45.1m allowance for asset impairment, the Houston properties accounted for a part of it, with some also from the reassessment of carrying value of certain assets which were acquired or developed previously for the O&G industry. 
  • The group’s net order book stands at about US$140-160m, and this excludes the two liftboats for Ezion that are unlikely to continue beyond the initial engineering stage. 
  • As for the four remaining liftboats for Ezion that are more than 90% completed, three are expected to be delivered in the coming weeks and the remaining one in Oct this year.

Challenging period for the group 

  • Looking ahead, in the absence of a positive catalytic industry development, management expects the next twelve months to be a challenging period for the industry and also the group. In the event that any material changes occur in relation to any of the existing banking facilities of the group, management will review and assess its ability to continue as a going concern. 
  • The stock is now trading at about 0.25x book, likely due to concerns over 
    1. any impact from Ezra, 
    2. possibility of further write-downs, 
    3. low new order flow, and 
    4. tight credit situation in general. 
  • We adjust our estimates and rolling forward to FY18 valuations, our Fair Value Estimation drops to S$0.19 (0.3x P/B). Maintain HOLD.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-07-24
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.19 Down 0.330