• Decent 1QFY15
• Clinches two liftboat orders
• Looking at more product lines

Healthy 1QFY15 results

Triyards Holdings reported its 1QFY15 results yesterday, with revenue falling 37% YoY to US$56.7m. Boosted by negative goodwill of US$3.9m from the acquisition of Strategic Marine, Triyards saw a 13% rise in net profit to US$8.2m in the quarter, accounting for 30% of our full year estimate. Core net profit is estimated to be US$4.7m, or about 20% of our full year recurring net profit figure. Gross profit margin was 23% in 1QFY15 vs. 14.2% in 1QFY14, mainly due to a higher-margin offshore fabrication project and different mix of projects at their respective completion stages.

Secures two liftboat orders from US based player

Meanwhile, the group also announced US$75.4m in new liftboat orders (two units, excluding owner furnished equipment), such that its newbuild pipeline has grown to eight liftboats. We understand that the customer is a JV between two US operators in which one is an established company that operates more than 20 liftboats in the US Gulf. The entry of US-based players into this region is a positive for Triyards which is seeking to grow its customer base.

Diversifying into new products

With the newly-acquired Strategic Marine, the group is diversifying into new product lines and may be looking to build vessels such as chemical tankers. The group is still receiving enquiries, but we believe there could be pricing pressure ahead for Triyards as clients cite the low oil price environment during contract negotiations.

Order book provides visibility

Including the order book of Strategic Marine (~US$45m), the group’s net order book currently stands at about US$300-350m, and will be recognised in these two years. Of this, an estimated US$15m from Lewek Constellation (completion by end Feb 2015) should be recognized in 2QFY15. We lower our P/E from 7x to 6x with the de-rating of the broader sector, and rolling forward our valuation to blended FY15/16 earnings, our fair value estimate slips from S$0.88 (prior to the blackout period due to the listing of EMAS Offshore, a related entity of Triyards) to S$0.65. Maintain BUY with a 12-mth horizon, but do note that oil price volatility may affect sentiment in the short term.

Source: OCBC Research - 9 Jan 2015