kenneth koh, market & equity analyst osama bakhteyar ......ezra currently holds around 67% of...
TRANSCRIPT
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
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Market StrategistsJoshua Tan, Head of Research
Kenneth Koh, Market & Equity Analyst
Soh Lin Sin, Macro | Equities Economist
Osama Bakhteyar, Macro | Equities Economist
SG & US Equity Analysts Wong Yong Kai, US Equities
Colin Tan, Telecoms | Technology
Caroline Tay, Real Estate
Benjamin Ong, Finance | Offshore Marine
Richard Leow, Transport & Logistics
By Phillip Securities ResearchMr. Chan Wai Chee, CEO
Jaelyn Chin, Operations Exec
01st Dec 14, 11.15am Webinar
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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22
Disclaimer
This presentation is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to subscribe
for, purchase or sell the investment products mentioned herein. It does not have any regard to your specific investment objectives, financial
situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss
arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks including the
possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. Access to
services and your account may be affected by market conditions, system performance and other reasons.
The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and
any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such
information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is
made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research
contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made
available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect,
incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been
advised of the possibility of such damages.
You may wish to seek advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase
any of the investment products mentioned. In the event that you choose not to seek advice from a qualified financial adviser, you should
consider whether the investment product is suitable for you before proceeding to invest and we do not offer advice in this regard unless
mandated to do so by way of a separate engagement.
You are advised to read the Conditions governing Phillip Securities Trading Accounts and the Risk Disclosure Statement carefully before
investing in this product.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.
3
Triyards Holding Limited
SGX: RC5
ETL SP EQUITY
Osama Bakhteyar
Investment Analyst
Phillip Securities Research
01 December 2014
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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Company Snapshot
4
Source: Bloomberg, Phillip Securities Research
Share Price (28 Nov 14) : S$0.65
52-Week range : 0.61 – 0.81
Market Capitalization : S$211 million
Fw P/E : 5.2x
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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55
Company Background
Profile
Triyards (ETL) is headquartered in Singapore and listed on the Singapore Mainboard
Stock exchange.
It provides integrated full-service engineering, fabrication and ship construction
solutions for the global offshore and marine industries.
Their main focus remains on sophisticated service platforms and equipment that can
tackle even the most complex offshore projects.
They remain the market leaders in the fabrication of self-elevating units (SEUs) in
Southeast Asia.
The company recently acquired Strategic Marine, a shipbuilding & fabrication
company, for A$23.3m.
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Business Overview
Specialized Ship Building – The Group's new buildingcapabilities include the ability to build technologicallyadvanced construction vessels (OSCVs), offshore supportvessels (OSVs) and self-elevating units (SEUs).
Rig Building -one of only three Singapore yards able to designand build its own proprietary drilling jack-ups with theintroduction of the new Premium Class 400 HPHT, TDU-400.
Offshore Engineering, Construction and Fabrication - Since2005, the Group specialized in medium to heavy industrialworks, ranging from steel fabrication to electrical installationright through to equipment manufacturing services.
Ship Repair, Maintenance and Conversion - the threeVietnam yards focus on afloat ship repaired projects and upslip - dry docking projects. Being the only yard in Vietnamwith a dock pit and situated along the South China Sea furtherenhances their competitiveness.
Business Overview of Strategic Marine - The Company hasproduced more than 360 quality craft, which includeGovernment high-speed patrol boats, offshore oilfield servicevessels, harbor and towage vessels, passenger vessels,military & paramilitary vessels as well as commercial fishingboats.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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Overview of SEUs Market
What are SEU’s (Self-elevating unit) or liftboats?
It is an offshore service platform with large open deck space, jack-up legs, cranes and livingquarters that can be utilized to perform a broad spectrum of services for the oil and gas andrenewable sectors
These services include repairs and maintenance of production platforms, well servicing, wellintervention activities and temporary housing.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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Overview of SEUs Market
Global demand for SEU considering falling Oil Prices
We believe that the demand for SEUs will remain stable, if not increase, due to the followingreasons:
Shallow water offshore fields remains a major source of oil production and the demand ofSEUs for such field will remain high due to lower production cost than deep and ultra-deepwater alternatives especially now when oil prices are taking free-fall;
Ageing offshore infrastructure and platforms in developed shallow water regions requiresextensive maintenance and upgrading in order to maintain production;
Growing need for maintenance of offshore renewables especially in the North Sea, whereSEUs are a cost effective solution.
Increased in supply of oil due to shale oil will reduce the capex in the deep to ultra-waterfields which will pave way for more capex for the servicing of the existing shallow waterfields.
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99
Overview of SEUs Market
Growth Prospects of SEUs• Well intervention and Inspection/Repair/Maintenance in the MENA region, North Sea and
Southeast Asia are expected to remain the largest markets for SEUs.
• While EOR (Enhanced Oil Recovery) is forecasted to be the catalyst for an upside beyond 2020 asfield lives are extended.
• According to Douglas- Westwood report the addressable vessel demand days are forecasted togrow by 12,141 to 41,386 from 2013 to 2020, presenting a CAGR of 5.1 per cent.
• Extremely low penetration rate in MENA and Southeast Asia implies vast opportunities forgrowth.
• We firmly believe that the penetration rate for such highly advanced SEUs will increase in futuredue to cost efficiency reasons
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Investment Highlights
Definite edge of Triyards in SEUs Triyards strategic focus has remained to be the construction of the self-elevating units (SEUs). It has remained to be a definitive market leader in the Southeast Asian region. The group has delivered seven SEUs so far since its inception and have established a significant track
record with its advanced newly-designed self-elevating units for use in deeper water that can work indepth of up to 105m.
Strategic location in Vietnam Three of their yards in Vietnam are located within a major shipbuilding cluster and are strategically
located along the South China Sea. The two yards in the Vungtau city provides a total facility size of 281,600 sqm.
Proven Track record to build highly advanced construction and OSVs They recently delivered the world’s largest OSV, Lewek Constellation, an ice-class, deepwater multi-lay
vessel with 3,000 MT heavylift capability. Triyards also retains the honor of building the world’s largest liftboat, BH450, in its Vungtau Shipyard,
Vietnam.
Synergies with Ezra Ezra currently holds around 67% of stake of the ordinary share capital. Triyards stands a good chance of realizing synergies as a part of Ezra Group, which will allow them to tap
into Ezra’s clientele base as well. They have already built number of OSVs and SEUs to date for them.
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1111
Investment Highlights
Expand production capabilities Triyards management is looking to diversify its business by focusing on ship repair operations and expanding
its crane making segment to cater 3rd party clients. The Group is also looking to expand in the jack-up rig building segment. Triyards has already design their own
proprietary drilling jack-up, TDU-400, and currently marketing to get their maiden contract.
Establishing presence in new market Triyards Management is focusing on to strategically expand their operational presence globally into the major
offshore oil & gas markets. Area of interest remains to be the Middle Eastern market where low penetration rates translate into higher
demand in the future
Synergies from new acquisition Triyards acquired Strategic Marine back in October 2014. The intension was to diversify their product categories so as not to be overly reliant on the offshore oil & gas
industry. Strategic Marine expertize lies more on construction and fabrication of high-speed aluminum-based vessels
Key Risk: Rising competition expected in liftboat market Triyards faces emerging competition from other local and international reputable construction services and
marine services companies. But high barriers of entry would keep new entrants from providing extra competition.
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Facilities
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Peers Review
We consider Triyards specialty to be in building SEUs,which is their core business, generating most of itsrevenue stream.
In total, only 15 yards have been involved in theconstruction and repair of SEUs.
On the global level Halimar Shipyard LLC on the Gulf ofMexico coast has constructed the most number of SEUsbut mostly all deployed within the same region as well.
Outside U.S., the most reputable constructors includeGMS, Lamprell and Triyards.
GMS and Lamprell are mostly active in the MiddleEastern region.
While Triyards takes the market share in the SoutheastAsian region.
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1414
Financial Result & Highlights
Triyard’s revenue declined in the FY14 to US$269m (-2.4% YoY). The decrease in revenue was due to thelower revenue recognition from the last stagecompletion of the subsea construction vessel, LewekConstellation, and a lower than expected contractwins.
Triyards generated -US$5.46m of Free Cash Flow fromincreased working capital and capex needs. Net Gearingremains stable although at higher levels of around 51%.But around 94% of these borrowings are related toworking capital requirements and in form of short termbank term loans.
Triyards orderbook stands at around US$325mproviding a solid visibility for next 18-22 months.
Taking the percentage of completion estimation intoaccount we believe that more than 2/3 of thisorderbook will be recognized in the FY2015.
we estimate the Net Profit for the FY2015E to increaseby 34.5% to US$36m.
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1515
Financials
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1616
Financials
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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1717
Valuation
Triyards currently trades at a forward PE of 5.2x and a forward EPS of 14x (SGD cents), which isway below from what its Peers are trading at.
Currently three of its main competitor (Conrad, Lamprell and GSM) are trading at an averageFw PE of 8.4x.
Other small/mid-sized shipyards listed in SGX trades at an average Fw PE of 11.7x.
To remain conservative in our valuations approach plus considering that low oil prices willaffect the market sentiment towards this sector, we used ~30% discount from the average FwPE of 10.61x to come to 7x.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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1818
Investment Merits - Summary
Front-runners in SEA - they are the market leader and one of the very few shipyards in SEAcapable of building highly sophisticated and advanced liftboats and OSVs.
A solid track record in building specialized OSVs and SEUs - has built one of the world’slargest liftboat (BH450) and also world’s largest offshore support vessel (LewekConstellation).
Venturing out to Global markets – is planning to tap into the Middle Eastern and WestAfrican markets to increase their geographical reach.
Experienced management team - combined experience of at least 100 years in the offshoremarine industry.
Value Synergies from new acquisition – will help them leverage on diverse clientele base ofStrategic Marine plus the close proximity of the two Vungtau-Vietnam yards will help expandtheir production capabilities.
Designed their own drilling rig TDU-400 - Aggressively marketing TDU-400 jack-up rig andany contract would bring around US$200m of revenues to the company.
Orderbook remains strong – Estimated net orderbook stands at around US$325 million as ofQ1 FY2015.
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Recommendation
We are positive on Triyards for being the marketleader in building advanced SEUs and OSVs.
We initiate our coverage on Triyards with a
"Buy" rating, in view of its investment merits
and solid growth potential.
Taking a deep discount of ~30% from its peer’saverage of 10.6x to 7.0x Forward PE, we valueTriyards at S$0.98, pegged at 14.0 FY15E EPS(post-acquisition adjusted in SGD cents).
This implies at least 50% upside from the lastclosing price.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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20
Market StrategistsJoshua Tan, Head of Research
Kenneth Koh, Market & Equity Analyst
Soh Lin Sin, Macro | Equities Economist
Osama Bakhteyar, Macro | Equities Economist
SG & US Equity Analysts Wong Yong Kai, US Equities
Colin Tan, Telecoms | Technology
Caroline Tay, Real Estate
Benjamin Ong, Finance | Offshore Marine
Richard Leow, Transport & Logistics
By Phillip Securities ResearchMr. Chan Wai Chee, CEO
Jaelyn Chin, Operations Exec
Ask Questions!
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
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2121
Disclaimer
This presentation is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to subscribe
for, purchase or sell the investment products mentioned herein. It does not have any regard to your specific investment objectives, financial
situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss
arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks including the
possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. Access to
services and your account may be affected by market conditions, system performance and other reasons.
The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and
any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such
information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is
made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research
contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made
available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect,
incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been
advised of the possibility of such damages.
You may wish to seek advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase
any of the investment products mentioned. In the event that you choose not to seek advice from a qualified financial adviser, you should
consider whether the investment product is suitable for you before proceeding to invest and we do not offer advice in this regard unless
mandated to do so by way of a separate engagement.
You are advised to read the Conditions governing Phillip Securities Trading Accounts and the Risk Disclosure Statement carefully before
investing in this product.