its ship repair into a significant business and diversify its

earnings streams.

The group is in a net cash position and we see further catalyst from the roll-out of its revolutionary third-generation liftboat, which will have the capabilities of a fullfledged jack-up at a 20% discount. UOB-KH has a target price of $1.11. At current price of $0.735, the stock is a laggard, trading at prospective PE of 6.0x and 5.2x for FY13 and FY14 respectively.

BACKGROUND

Triyards is an offshore fabricator specialising in: a) advanced construction and offshore support vessels (OSV), and b) self-elevating units (SEU), including liftboats. Liftboats are self-propelled, self-elevating mobile platforms used for servicing fixed offshore installations. Triyards operates two yards in Vietnam and one fabrication facility in Houston, US.OUTLOOK/RECOMMENDATION

• Proxy to growing acceptance of liftboats. Triyards is a proxy to the growing acceptance of liftboats internationally, being one of the few yards outside the US capable of building such vessels. In the past, liftboats were used solely in the US Gulf of Mexico, but are now gaining traction internationally as the industry recognises liftboats as a safer and more efficient alternative to traditional work barges.

• Launched third-generation SEU design. Triyards has launched its proprietary TDU-400 jack-up rig, which is a lightweight drilling unit with the full capabilities of a jack-up rig, but at 80% of the cost. The TDU-400 rig will cost up to US$160m-180m per unit, compared with US$60m and US$90m for third-party designed first- and second-generation liftboats respectively.

• Geared for growth. Triyards will embark on further growth by: a) expanding ship repair capacity, b) diversifying into new products such as high-speed aluminum commercial and patrol vessels, and c) growing its equipment business and branding.

• Seeing strong enquiries from SEA and the US. According to management, Triyards is seeing healthy liftboat enquiries from Southeast Asia and the US. Several US liftboat owners are considering building their vessels in cheaper countries, such as Vietnam, instead of the US, where shipbuilding costs are 10-15% lower.

• Maintain BUY and target price of S$1.11, pegged at 7.9x FY14F PE, a 10% discount to peers’ average of 8.8x FY14F PE, due to Triyards’ shorter operating track record and lumpy profit recognition from Ezra’s Lewek Constellation, which comprises 17% of FY14F net profit.