Triyards

Triyards: 3QFY14 net profit fell 17% y/y to US$6.3m, bringing 9MFY14 bottom line to US$21.4m or 75% of street estimates. Revenue slid 16% to US$55.3m, on the back of lower revenue recognized for one SEU, of which sea trials were conducted at the end of 3Q14. Typically, revenue recognition tapers off during sea trials. This was partially offset by higher revenue recognized from the construction of another SEU which has already reached advanced stage. Gross margins improved 3.4ppt to 22.6%. Bottom line was weighed by increased a tripling in finance expenses on higher loans to fund working capital needs and doubling in tax expenses. Management expects competition to toughen up over the next year with the penetration of Chinese competitors. Management is trying to lock in increased market share of liftboats and medium to large size OSVs, given their rosy demand outlook. NAV stands at US$0.5557, translating to ~0.9x P/B. The stock trades at 6.7x annualized 9MFY14 P/E