Brokers' call: Triyards Holdings

TRIYARDS HOLDINGS

Broker: OCBC Investment Research

Call: Buy

Target Price: 61 Singapore cents

Last year was a good one for Triyards Holdings in terms of new orders, clinching US$620 million (S$893 million) for the calendar year, compared to US$170 million in 2014.

In the first quarter of financial year 2016, it reported a 38 per cent rise in year-on-year revenue to US$78.1 million but saw a 25 per cent decline in net profit to US$6.2 million.

Looking ahead, it is hard to predict whether the same momentum can be maintained, but management mentioned that it is still looking at a healthy tender book. Due to the group's focus on the liftboat business as well as its more diversified offerings, it is faring relatively well compared to other operations and maintenance peers. Its order book of about US$564 million (as of Jan 8) provides earnings visibility to financial year 2017.


EZION HOLDINGS

Broker: DBS Research Group

Call: Buy

Target Price: S$1

Ezion has a prudent business model in the oil and gas sector. Fleet expansion is backed by long-term charters of three to five years. Demand is also relatively more resilient as service rigs are exposed to the production phase in the shallow water segment.

The company announced that it has secured an agreement to jointly market two liftboats being built by a Chinese state-owned enterprise to support the offshore wind farm, oil and gas activities in the energy sector.

Only 10 per cent to 20 per cent of Ezion's fleet, largely in Mexico, are deployed for developmental drilling, which sees relatively higher risk of cancellations amid low oil prices.

Earnings recovery is expected with resumption of service rigs currently under repair by the first half of the year and successful diversification of customer base, among other things.


CHINA AVIATION OIL

Broker: RHB

Call: Buy

Target Price: S$1.24

Despite often being perceived as a risky Chinese jet-fuel trading house, China Aviation Oil (CAO) has managed to deliver low-risk resilient profits on a rare jet-fuel import monopoly and a lucrative stake in China's largest airport refueller. It aims to double profits by 2020 through mergers and acquisitions.

Its sizeable operating volume in China gives CAO considerable bargaining power when dealing with suppliers. In the next five years, management intends to deploy its war chest of US$111 million in net cash for synergistic mergers and acquisitions.

It has shared its 2020 target of doubling profits to US$120 million through both organic (targeting the overseas market) and inorganic growth (through synergistic downstream mergers and acquisitions).

The market currently has a misperception of the company, believing it to be a high-risk Chinese oil trading house. This has led to a weak share price and undeserved valuations.

A version of this article appeared in the print edition of The Straits Times on January 18, 2016, with the headline 'Brokers'Call'. Print Edition | Subscribe