RC5 - Triyards Holdings Ltd

[watsa_is_a_randian_hero]

This is not an original idea, so I need to give credit to the source.  There is a good write up here:

 

http://saharainvesting.wordpress.com/2013/02/08/triyards-holdings/

 

Reposting to this board because I haven't seen any discussion on it, or its parent, here.

 

Here is the executive summary:

 

-Company is involved in vessel and rig construction and repair services. 

-Headquartered in Singapore.

-Company is a recent spin off of Ezra; stock has declined significantly since spin off despite continued positive fundamental performance.  This could be due to lots of selling of recipients from spinoff.

-$197mm SGD market cap

-$42mm SGD TTM profit; $42mm of projected NTM profit (4-5X earnings)

-$173mm SGD tangible book value (1.1x)

-Strong growth since inception (albeit lumpy)

-Strong growth and ROE history at former parent Ezra with longer history; should benefit from similar mgmt

-ROE in short history over 50%...longer-term ROE of Ezra 26%+.

-Big 4 auditor (E&Y)

-Ezra management has paid dividend's, issued spinoff's in the past to create value

-Market for SEU's in asia could be big growth source (see link above)

-Ezra is the target of takeover speculation; a takeover could prove a catalyst for Triyards as well, with Ezra fulling exiting, or with a high transaction multiple serving as a local comp and setting a floor for Triyard. 

 

Cons:

-Risky highly cyclical industry

-Emerging market exposure with construction sites in Vietnam

-Ezra has retained control

 

Bottom line is strong returns on capital + cheap multiple is a winning formula typically only seen on hairy assets with terminal decline risk (blackberry comes to mind).  While this asset is in a lumpy industry and faces emerging market risks, it has experienced management from a company with a superior track record

 

[twacowfca]

This is not an original idea, so I need to give credit to the source.  There is a good write up here:

 

http://saharainvesting.wordpress.com/2013/02/08/triyards-holdings/

 

Reposting to this board because I haven't seen any discussion on it, or its parent, here.

 

Here is the executive summary:

 

-Company is involved in vessel and rig construction and repair services. 

-Headquartered in Singapore.

-Company is a recent spin off of Ezra; stock has declined significantly since spin off despite continued positive fundamental performance.  This could be due to lots of selling of recipients from spinoff.

-$197mm SGD market cap

-$42mm SGD TTM profit; $42mm of projected NTM profit (4-5X earnings)

-$173mm SGD tangible book value (1.1x)

-Strong growth since inception (albeit lumpy)

-Strong growth and ROE history at former parent Ezra with longer history; should benefit from similar mgmt

-ROE in short history over 50%...longer-term ROE of Ezra 26%+.

-Big 4 auditor (E&Y)

-Ezra management has paid dividend's, issued spinoff's in the past to create value

-Market for SEU's in asia could be big growth source (see link above)

-Ezra is the target of takeover speculation; a takeover could prove a catalyst for Triyards as well, with Ezra fulling exiting, or with a high transaction multiple serving as a local comp and setting a floor for Triyard. 

 

Cons:

-Risky highly cyclical industry

-Emerging market exposure with construction sites in Vietnam

-Ezra has retained control

 

Bottom line is strong returns on capital + cheap multiple is a winning formula typically only seen on hairy assets with terminal decline risk (blackberry comes to mind).  While this asset is in a lumpy industry and faces emerging market risks, it has experienced management from a company with a superior track record

 

What's their edge?

[watsa_is_a_randian_hero]

Not sure what you are looking for here...such a broad statement.

 

I have no first hand experience with management or the company.  Everything I know comes from reading the financial reports and various blog postings such as the one I provided the link to above.

 

I look at it as the proof is in the pudding: the historical ROE and margins of Triyards and Ezra as evidence of its competitive success and "edge".  That said, consider the following as stories to support specifically why it has achieved success and why it is reasonable to expect continued success:

 

-Good management, experienced, with Ezra connections

-Cheap labor

-SEU experience

[king888]

It reminds me of STP&I the fabrication yard maker in Thailand. Very high profit margin and ROE. STPI has been a 15x baggers in the last five years. It was trading at 3-4x PER before the huge run. The competitive of STPI is the skilled labor and relatively cheap wage. And the customers are not likely to switch to other cheaper contractor due to safety concern.  Maybe the same case apply to Triyards.

 

Thanks for the idea. This one looks interesting.