Triyards

Triyards: The offshore fabrication and engineering solutions provider marks its move into the higher margin ship repair segment after securing its first ship repair work for its newly commissioned floating dock. The is in line with the group's ambitions to diversify its earnings streams into ship repair since its IPO in Oct 2012. The enquiries for repair works are reportedly strong after the commissioning of floating dock Lewak Hercules in Apr, and the dock has another contract in its pipeline. However, the negative outlook for the shipping industry might persist and shipowners who generate less earnings are less willing to send their ships for major repair work, or pay top dollar for priority works to be done. Additionally, China Shipping Industry, one of the top 20 repair yards in China, recently posted its 2012 financials that earnings tumbled despite an increase in ship repair works carried out, mainly due to a cut in ship repair prices of at least 50%. Granted, Triyards would enjoy the addition of a recurring income stream to provide a buffer on its operational cash flow. However at this point, no further financial details were made on the contract to provide an estimate on the impact to the group's earnings. Triyard currently trades at a forward P/E of 5.5x, and has an estimated 12-month TP of $1.09.