Grand Banks Yachts

Grand Banks Yachts (S$0.23): 1QFY16 results turned around on Palm Beach synergies

The luxury yacht maker achieved a turnaround in its 1QFY16 results with a net profit of $1.2m, reversing from a loss of $1.3m a year ago, while revenue more than doubled to $14m (+115.5%).

The recovery was attributable to improved efficiencies and synergies that arose from strategic initiatives undertaken following the acquisition of Palm Beach Motor Yacht (PBMY) in Aug last year:
1) Investments in new boat building equipment in Malaysian facilities
2) Investments in training for Malaysian workforce
3) Align production processes to PBMY Australia
4) Partially migrate PBMY Australia’s production to Malaysia
5) Reorganization of the Malaysian factory

Consequently, gross margin expanded 15ppt to 24.5%, which was also bolstered by a strong USD (against the AUD and MYR), which is the transactional currency for more than half of the group’s boat sales.

During the quarter, the yacht maker secured five new boat orders and lifted its order book to $32.1m as at Sep ’15 (Sep ’14: $17.5m).

Going forward, management expects FY16 to register markedly improved result as compared to FY15 given its larger boat building capacity with enhanced capabilities, and possible tailwinds from favourable FX movements.

Management also plan to accelerate marketing efforts via frequent participation in prominent boat shows, including the upcoming Fort Lauderdale International Boat Show (world’s largest boat show).

Grand Banks Yachts is currently trading at 0.96x P/B.