Triyards Holdings - 1QFY15: Bags US$75m Contracts From US-Based Operators
Triyards bagged US$75m liftboat contracts from US-based operators in 1QFY15, bringing its orderbook to some US350m. Management expects to secure another US$150m worth of contracts from Ezion in the near term. We expect demand for liftboats, which are mainly used in the servicing and maintenance of fixed platforms in shallow waters, to remain relatively resilient despite the recent sharp drop in oil prices.Maintain BUY. Target price: S$1.04.
RESULTS
• 1QFY15 net profit up 13% yoy to US$8.2m, in line with expectations. Triyards’ 1QFY15 net profit of US$8.2m (+13% yoy) is in line with expectations, aided by higher gross margin and other income. Revenue dropped 37% yoy to S$57m on the back of lower contributions from Lewek Constellation and three SEUs which were completed or at the final stages of completion during the quarter. We expect higher revenue contributions in subsequent quarters from its newly-acquired yard and recent order wins.
• Healthy gross margin of 22%. Gross margin improved 8ppt yoy on the back of higher margin from an offshore fabrication project and a different product mix. Other income increased to US$4.2m due to provisonal negative goodwill of US$3.9m for SM Group and increased sales of scrap. Admin expenses rose to US$6.7m (+81% yoy) due to the acquisition of SM Group.
#STOCK IMPACT
• Shallow water segment more resilient to sharp oil price volatilities. Triyards specialises in building liftboats which are mainly used in the servicing and maintenance of fixed platforms in shallow waters. Based on Infield systems report, the breakeven cost for shallow-medium water depth is US$20-40 per barrel compared to US$40-80 per barrel for deeper waters. Additionally, while lower oil prices are likely to negatively impact capex budgets for oil majors (NOCs and IOCs), opex budgets (including liftboats) are relatively more resilient. Thus, we expect demand for liftboats to remain relatively more stable.
• Bags US$75m (excluding owner furnished equipment) from two liftboat contracts from US-based operators. The maiden contract win from an experienced US-based operator acts as an endorsement to Triyards’ superior liftboat building capabilities in Southeast Asia and paves way for more of such contracts wins. With the latest contract awards, Triyards has won three contracts worth US$127m for FY15 and five contracts worth US$240m over the last six months.
• Healthy orderbook of US$350m; expect another US$150m worth of contracts from Ezion in the near term. The latest contract wins take Triyards’ orderbook to some US$350m, excluding the A$40m-50m orderbook for its newly-acquired Vung Tau yard. This will provide earnings visibility for the next two years. Management is currently in the advanced stages of securing US$150m liftboat contracts from Ezion which are tied to the recent issuance of 29.5m warrants. In addition, Triyards is in the various stages of discussion to secure about US$200m worth of contracts for liftboats, OSVs and chemical tankers.
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