Triyards results in-line. Bright prospects

2QFY13 results in line with expectations
Triyards Holdings (Triyards) reported a 23% YoY rise in revenue to US$79.4m and a 157% increase in net profit to US$7.1m in 2QFY13, such that 1HFY13 revenue and net profit accounted for 43% and 46% of our full year estimates, respectively. Results were in line with our expectations as we are expecting more revenue to be recognized in 2HFY13. Revenue increased in 2QFY13 due to two self-elevating units (SEUs) which started construction, as well as completion of variation order on an offshore support vessel. Gross profit margin in 1HFY13 was stable compared to 1HFY12 at about 17%.

Healthy enquiries for SEUs and supply vessels
Management revealed that it is receiving healthy enquiries for the construction of SEUs as such units gain traction in the region, and we expect at least one contract to materialize in the following months. The group has also received enquiries for building customized supply vessels.

May market 3rd generation SEU in the near term
The group has completed the design of the third generation SEU, and it is in the process of being approved by a classification society. Unlike the first and second generation SEU, this latest one has drilling capabilities (hook load 1500 kips), and is essentially a smaller jack-up drilling rig (water depth 400ft). Management is optimistic about the prospects of this SEU, which would cost cheaper than the usual jack-up rig. Hence we expect the price tag would be lower than US$200m.

Maintain BUY
The group’s floating dock has also been completed, and management expects to secure a “good base load” of ship repair work. Meanwhile, net order book stands at US$324m, comprising three SEUs and the Lewek Constellation. With a net cash position of US$3.8m and low capex expected for this year, chances are higher that a yard acquisition may materialize in the near future. Maintain BUY with S$1.07 fair value estimate, based on 8x FY13/14F earnings.