• No surprises in results
• Healthy tender book
• Low net gearing of 0.38x

1QFY16 results in line

Triyards Holdings reported a 38% YoY rise in revenue to US$78.1m but saw a 25% decline in net profit to US$6.2m in 1QFY16, such that topline and bottom-line accounted for 25% and 24% of our full year estimates, in line with expectations. We note that 1QFY15 was boosted by a US$3.9m negative goodwill which was oneoff in nature; stripping this out, net profit actually rose about 30% YoY. Gross profit margin was 18.7% in the quarter vs. 22.9% a year ago. Historically, the group’s gross margin have ranged from the high teens to low 20s, and this is expected to remain the case going forward, despite the change in product mix.

Still bidding for more projects

2015 has been a good year in terms of new orders for the group, clinching US$620m for the calendar year compared to US$170m in 2014 and US$120m in 2013. Looking ahead, it is hard to predict whether the same momentum can be maintained, but management mentioned that it is still looking at a healthy tender book comprising liftboats, dive support vessels and tankers. With the IMO NOx Tier III requirements in North America and US Caribbean Emission Control Areas being effective on 1 Jan 2016, owners of older vessels which do not satisfy this requirement may have to place orders for new vessels. This could mean more new order opportunities for the group.

Net gearing low at 0.38x

Net gearing remained low at 0.38x in the quarter; about 92% of the group’s borrowings relates to working capital financing. Due to the group’s focus on the liftboat business as well as its more diversified offering, it is faring relatively well compared to other O&M peers. Meanwhile, the group’s net orderbook of about US$564m (as of 8 Jan 2016) provides earnings visibility to FY17. Maintain BUY with S$0.61 fair value estimate, based on an undemanding 5x P/E on FY16 earnings.

Source: OCBC Research - 12 Jan 2016