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New contract wins fail to boost confidence in Triyards

Michelle Zhu
Michelle Zhu3/15/2017 02:48 PM GMT+08  • 2 min read
New contract wins fail to boost confidence in Triyards
SINGAPORE (March 15): OCBC is has downgraded its call on offshore and marine (O&M) provider Triyards Holdings to “hold” from “buy” previously, with a lower fair value estimate of 34.5 cents.
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SINGAPORE (March 15): OCBC is has downgraded its call on offshore and marine (O&M) provider Triyards Holdings to “hold” from “buy” previously, with a lower fair value estimate of 34.5 cents.

The downgrades comes despite Triyards’ recent announcement of contract wins worth US$230.6 million ($326.2 million) for the fabrication of two passenger ferries by its wholly-owned subsidiary, Strategic Marine, for Scottish operator Pentland Ferries and another undisclosed Asian operator.

(See also: Triyards wins two ferry orders worth US$20 mil)

In a Wednesday report, lead analyst Low Pei Han explains that the research house is anticipating a potential impact beyond what OCBC knows about and estimates for the stock, given it may face a default from Ezra Holdings.

OCBC presently estimates that Triyards is due to suffer a net US$6.8 million impact from balances due from or to related and affiliated companies on its balance sheet. Additionally, Triyards has issued corporate guarantees for joint banking facilities with Ezra with a maximum liability of US$30 million.

“Despite the tough operating environment, the group has been profitable every quarter, which is quite commendable. Going forward, margins may remain under pressure with the competitive environment,” cautions Low.

See also: Keppel O&M's CEO Chris Ong to lead merged entity with SembMarine; proforma enlarged BV estimated to be at $8.35 mil

“Though the stock is now trading at only close to 0.3x book, investors may be awaiting further clarity on the impact that Triyards may face from an Ezra default.”

On a more positive note, Low points out that that Ezra’s 61% stake in Triyards has been pledged to two banks, which means there may be a change in ownership in the event that Ezra defaults.

She adds that the beleaguered offshore support provider also does not account for any part of Triyards’ order book.

As at 2.46pm, shares of Triyards are trading 1.7% lower at 29 cents.

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