Triyards Holdings - OCBC Investment 2017-07-27: Tough Times

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TRIYARDS HOLDINGS LIMITED RC5.SI

Triyards Holdings - Tough Times

• US$63m net loss in 3QFY17.
• US$45.1m asset impairment.
• Protracted downturn.

Poor 3QFY17 amidst challenging period 

• It has been a challenging period for Triyards Holdings, despite starting its product diversification efforts a few years ago. 
• Oil prices are still hovering around the US$50/bbl level, and demand for offshore oil and gas activities remains weak, resulting in an extremely competitive market for industry players. 
• The group has actually been profitable every quarter since listing in 2012, except for the past two quarters which saw net loss of US$6.3m in 2QFY17 and net loss of US$63.3m in 3QFY17 (dragged by significant impairments). 
• In 3QFY17, the group had a gross loss 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.
• 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.

Low new order flow 

• 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. Meanwhile, concerns remain over 
  1. any impact from Ezra, 
  2. possibility of further write-downs, 
  3. low new order flow, and 
  4. the tight credit situation in general. 
• With a reallocation of resources, we are ceasing coverage on the stock. 

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-07-27

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