Triyards Holdings - OCBC Investment 2016-10-21: Recovery To Take Some Time

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TRIYARDS HOLDINGS LIMITED RC5.SI

Triyards Holdings - Recovery To Take Some Time

• US$17.8m net profit in FY16.
• Wins US$27.6m of contracts.
• Forgoes dividend.

FY16 core net profit in line 

• Triyards Holdings reported a 7% YoY rise in revenue to US$94.2m but saw a 73% drop in net profit to US$2.2m in 4QFY16, impacted by a US$1.7m impairment for its Houston facilities. 
• On a full year basis, net profit fell 34% to US$17.8m, accounting for 87% and 82% of ours and the street’s full year estimates, respectively. 
• Stripping out the impairment and one-off items, we estimate core net profit to be S$4.5m in 4QFY16, such that the full year figure of S$19.5m made up about 97% of our full year estimates, in line with expectations.

Secures contracts worth US$27.6m 

• Meanwhile, Triyards also announced that it has won three more contracts: 
  1. to build a floating dock for a new client in the Middle East, 
  2. a fabrication job for a long-standing client, as well as 
  3. to build a service craft. 
• These contracts add a total of US$27.55m to the order book which currently stands at US$422m.

Conserving cash 

• Given the dim industry outlook, the group has not declared a dividend, compared to S$0.01/share the same period last year. This is not surprising given how bank financing could be tighter following the Swiber incident which has rattled the industry. 
• According to The Business Times, there is talk that IE Singapore is working with local banks to provide funding for new projects in the oil and gas sector, though this has not been formally announced. Should this be official, we view this as a positive development for companies such as Triyards which are still securing orders.

Remains profitable but recovery to take some time 

• Unlike many of its peers, Triyards has managed to remain profitable in this tough environment, supported by its diversified order book and forward-looking management. 
• We have lowered our earnings estimates as industry recovery may be longer than expected given a still weak global economy, and margin pressure could continue to persist. 
• As such our fair value estimate drops from S$0.51 to S$0.35 (5x FY17F earnings). 
• Downgrade to HOLD.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-10-21

OCBC Investment SGX Stock Analyst Report HOLD Downgrade BUY 0.35 Down 0.510