Monday, July 15, 2013

Triyards Holdings (ETL SP) 3QFY13: In Line; Ramps Up Ship Repair Capacity (UOBKH)

Triyards Holdings (ETL SP)
Share Price S$0.74
Target Price S$1.11
3QFY13: In Line; Ramps Up Ship Repair Capacity

Triyards’ reported 3QFY13 net profit was in line with our forecast. The group had recently commissioned a floating dock, which will ramp up ship repair capacity and contribute incremental earnings of US$2m-3m a year. Management also indicated that Triyards is seeing strong enquiries for their proprietary third-generation SEU, which will be the main driver of order growth going forward. Maintain BUY with unchanged target price of S$1.11


Results
• Profit in line. Triyards reported a net profit of US$7.5m for 3QFY13, in line with our forecast of US$7.3m. 9MFY13 net profit of US$21.1m formed 70.3% of our full-year profit forecast.

• Profit dip due to recognition of lumpy contract. 3QFY13 revenue and profit declined by 61% yoy and 55% yoy respectively, mainly due to lower revenue recognised for the construction of the subsea construction vessel Lewek Constellation (Constellation). The Constellation is currently berthed in Vietnam and is expected to leave the yard in September for final outfitting work.

• Margins in line. 3QFY13 gross profit margin of 19% was 6ppt higher than 3QFY12, as: a) certain SEU projects achieved cost savings from fabrication as well as procurement of material and equipment, b) two ship repair projects were completed, and c) one offshore fabrication project was completed in 3QFY13.

• Healthy net gearing of 29%. Triyards’ reported end-3QFY13 net gearing was 29%, compared with 60% at end-FY12.

• Robust orderbook. Triyards net orderbook stands at US$264m, which will be fully recognised by FY14.

• Ramps up ship repair capacity. Triyards recently commissioned a floating dock for ship repair and has completed its first ship repair work for the Mermaid Challenger. According to management, the floating dock will be able to service up to 20-30 offshore support vessels (OSV) per year and we estimate incremental full-year earnings contribution of US$2m-3m.

• Strong interest for third generation SEUs. Management indicated that after a round of roadshows in the US, Triyards is seeing strong interest for their proprietary third-generation self-elevating units (SEU). These third-generation units (TDU-400) will incorporate drilling and construction capabilities, unlike the previous generation units which can only perform servicing work. The third-generation units will have the capabilities of a full-fledged jack-up rig, but at a 20% discount. These units will cost up to US$160m-180m, compared with US$60m and US$90m for third-party designed first- and second-generation liftboats respectively.

Earnings Revision/Risk
• No change in earnings forecast.

Valuation/Recommendation
• Maintain BUY and unchanged target price of S$1.11, pegged at 7.9x FY14F PE, a 10% discount to peers’ average of 8.8x FY14F PE, due to Triyards’ shorter operating track record and lumpy profit recognition from Ezra’s Constellation, which comprises 17% of FY14F net profit.

Share Price Catalysts
• Contract wins.
• EPS-accretive acquisitions.
• Growing acceptance of liftboats outside of the Gulf of Mexico (GoM).




Source/Extract/Excerpts/来源/转贴/摘录: UOB Kay Hian research
Publish date: 12/07/13

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