• Healthy set of earnings
• Secures US$17.8m non O&G orders
• Continues steady execution

Healthy 2QFY16 results

Triyards Holdings reported a 15% YoY rise in revenue to US$70.5m and a 4% increase in net profit to US$5.3m in 2QFY16, such that 1HFY16 net profit accounted for about 44% of our fullyear estimate. Given the lumpiness in quarterly earnings, we judge this set of results to be within our expectations. Gross profit margin was 20.9% in 2QFY16 compared to 18.7% in 1QFY16 and 22.4% in 2QFY15.

US$17.8m new contract wins; non oil and gas related

Meanwhile, the group also just announced new contract wins of US$17.8m, comprising three wind-farm support vessels and a luxury river cruise vessel. We understand that the wind farm vessels are crew transfer vessels of a catamaran shape, and estimate that each vessel costs about US$4m. This is further evidence of the group’s ability to diversify away from the oil and gas segment. As at end Feb 2016, Triyards’s order book stood at US$513m, which is about two times its revenue in FY15.

Already taken into account two Ezion liftboats that are on hold

We expect the group to recognise about 30% of its order book by the end of this year, translating to about US$154m in revenue. Do note that this excludes the two latest Ezion liftboats that are currently put on hold due to proposed changes in design (no construction work has started yet for these units), and we had taken this into account in our estimates.

Undemanding valuations for a steady company

Meanwhile, the group’s net debt to equity ratio rose from 0.31x in end FY15 to 0.55x as at end 2QFY16, mainly due to working capital needs. Excluding project-related financing, its net debt to equity ratio was 0.04x. Looking ahead, management will focus on the execution of its order book and continued diversification of its products beyond the oil and gas industry (e.g. chemical tankers, scientific research vessels, wind-farm support vessels). Maintain BUY with S$0.61 fair value estimate, based on an undemanding 5x FY16/17 P/E.

Source: OCBC Research - 8 Apr 2016