Triyards Holdings - Climbing To a Higher Peak

Triyards-Yard
Triyards has won a USD12.8m contract for four ASD tugboats, to be delivered in 2017, marking its entry into a new product range for a new customer. Maintain BUY with a SGD0.94 TP (135% upside). This takes its orderbook to USD577m. Triyards’ ability to maintain its order win momentum underpins our confidence in its long-term prospects. It is also one of the few companies in the sector with a growing earnings profile.

New product range for new customer
The four RAstar 3400 Azimuth Stern Drive (ASD) tugs are designed for escort operations in adverse sea and weather conditions. The customer is a Singapore-based international specialist marine craft group. We view the continuing diversification of Triyards’ order book and product range as a positive development, providing increasing flexibility that enables it to weather the downturn in the oil & gas space.

Margins likely higher than average
The USD12.8m price tag excludes owner-furnished equipment. Since engineering and fabrication work typically yield higher margins than procurement, the lower quantum of procurement in these contracts implies higher-than-average margins for the contracts overall.

Orderbook finds a higher peak
With this win, Triyards’ orders on hand hit another record high of USD577m. This provides c.1.5 years of revenue visibility, which is comparable to the orderbook of large-cap Keppel Corp (KEP SP, BUY, TP: SGD10.00).

Technical Analysis
Daily Chart
Likely the most clearly undervalued stock in the sector
We maintain that Triyards’ valuations have been dragged down by concerns over its parent Ezra (EZRA SP, TRADING BUY, TP: SGD0.33), which we believe are similarly overdone. Triyards is operationally independent of Ezra, with negligible inter-company balances and <2% orderbook exposure. At 0.4x P/BV and 2.7x FY16F P/E, this stock is likely the most under-valued in the offshore oil & gas space in Singapore. Our TP is based on a 1.05x current P/BV multiple, which we believe conservatively values its 14-15% ROEs and growing earnings. (Read Report)

Source : RHB Research

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