Triyards Holdings

UOBKayhian on 14 Oct 2014

FY14F PE (x): 5.8
FY15F PE (x): 5.1

Potential M&A in the offing. Triyards is currently in advanced stages of discussion for
the acquisition of an existing yard facility in the region, which will increase its yard
capacity by 50-60%. Although its existing yard space in Vietnam is currently underutilised
(~55%), management expects yard space to fill up quickly once the contracts
under negotiations materialise. Besides increased capacity, the acquisition is also
expected to help Triyards add new product segments and strengthen its positioning in
its existing product offerings. The acquisition will be fully funded by the recent placement
proceeds (~S$20m) and internal cash, and is expected to be earnings-accretive.
Our preferred OSV small-cap pick with a target price of S$1.10, based on 8x FY15F PE,
or a 15% premium to peers’ long-term mean of 7x, as we see strong earnings growth
potential from growing liftboat demand. The premium is justified, considering Triyards
being one of the very few Asian yards with an excellent track record of building and
delivering liftboats. The stock is currently trading at a cheap 5x FY15F PE relative to
peers’ average of 8x, providing huge upside potential.