• Steady 3QFY14 results
• Secures two SEU orders
• Expecting more wins

No surprises in 3QFY14 results

Triyards Holdings (Triyards) reported a 16% YoY drop in revenue to US$55.3m and a 17% decrease in net profit to US$6.3m in 3QFY14. Results were within expectations; the drop in revenue was due to lower revenue recognized for one of the SEUs (450 series), of which sea trials were conducted at the end of 3QFY14. Revenue recognition normally tapers off when a vessel reaches the sea trial stage. This was partially offset by higher revenue recognition of another SEU (335 series) which progressed into an advanced stage of construction in 3QFY14. Gross margin and net margin were healthy at 22.6% and 11.4%, respectively, in the quarter.

Secures two orders

After a hiatus, the group finally announced that it has secured two SEU orders worth US$112m in total. This consists of an SEU of the BH335 series and another SEU of the BH 300-L4T series (both for customers based in SE Asia). This also brings its total liftboat order wins to 12 since 2007. Currently the group’s net order book stands at about US$245m, comprising five SEUs in different stages of completion, as well as remaining work for the Lewek Constellation.

Expecting more contract wins

Meanwhile, the group has about up to eight more contracts under negotiation with two at more advanced stages. Assuming a contract size of US$50m for each and a 50% success rate, this would add about US$200m worth of work to the group’s order book.

Positive outlook

Management commented that the demand for liftboats in Asia is expected to remain buoyant, especially with increasing acceptance of their use. As a yard that is now synonymous with liftboats, Triyards is positioned to benefit from the positive outlook, but we would monitor rising competition from new players such as those in China. Maintain BUY with S$0.88 fair value estimate (based on 7x blended FY14/15F earnings).

Source: OCBC Research - 11 Jul 2014