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Tuesday, July 23, 2013

NRA Capital initiates coverage on Triyards with ‘Overweight’


On 19 July, NRA Capital initiated coverage on Triyards with a ‘Overweight’ recommendation and a $0.97 fair value, based on 7x PER FY14 (30% discount to its peers in the marine and offshore industry to account for its smaller size).

Analyst Joel Ng of NRA Capital wrote:

“Triyard is one of only three Singapore yards (the other two being Keppel and Sembcorp) capable of designing and building its own proprietary drilling jack-ups and SEUs, with the Class 400 HPHT (high pressure, high temperature) drilling jack-up rig, TDU-400. We note that this is a positive step for the group to differentiate its products and services from other Singapore and China yards that are coming into this space.

Triyards has a yard in Houston (above) and two yards in Vietnam. Company photoA mini Keppel Shipyard in the making

"Triyards is a fabrication and ship construction company mainly for the offshore and marine industries. It has two yards in Vietnam and one yard in the US. The two yards in Vietnam focus on marine and offshore fabrication works and vessel construction, constructing vessels such as its proprietary SEUs and Offshore Support Vessels, while the Houston, US yard produces equipment such as specialty cranes and A-frames, which are installed on SEUs and OSVs.

Good track record and experience

"It has built a total of six SEUs for clients around the world, all delivered on time and within budget. These SEUs are now operating in regions such as Asia Pacific and the Middle East for oil majors including Shell and Pertamina. It recently commenced construction for two of its latest and largest SEU models, the BH 450. In addition, it has an established track record for building OSVs and construction vessels.

Expanding around the region

"As part of its expansion plan, it is in the process of acquiring an Australian company with a well-sited logistics and supply base within the shipbuilding and marine-related region of Western Australia (WA) for A$6.75m. The site is located near the port of Remantle, WA’s largest and business general cargo port. The acquisition is likely to be funded by cash and issuance of 8.9 million new ordinary shares to the seller. It plans to complete the acquisition by end 2013.

Repair and maintenance to supplement income

"Its newly commissioned floating dock (that will cater mostly to repairs of offshore vessels) will begin contributing in 4Q13.

Oil and gas capex remains robust

"Strong growth in demand from non-OECD countries is expected to keep oil prices steady. Infield Systems estimates that offshore oilfield infrastructure capital expenditure will grow by more than 70% for the period 2012-2016 compared to 2007-2011."

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