Ezra Holdings

OCBC on 13 Jul 2012

Ezra Holdings (Ezra) reported a 61% YoY rise in 3QFY12 revenue to US$265.6m and a 244% increase in net profit to US$22.4m, such that 9MFY12 net profit accounted for 81.5% and 85.5% of ours and the street’s full-year expectations, respectively. We estimate core operating profit to be around US$11m vs. 2QFY12’s US$3m. Administrative expenses continued to rise to US$34.0m in 3QFY12; we would monitor this figure to see if the group is able to rein in costs after the acquisition of AMC. Meanwhile, Ezra also announced that it has won six contracts worth about US$87m for the charter of PSVs and AHTS vessels as well as a US$77m contract to build a specialized offshore unit. The group remains cautiously optimistic about the outlook of the oil and gas industry, and we believe the focus going forward should be on the smooth execution of subsea projects. Maintain BUY with S$1.35 fair value estimate on the stock.

Decent 3QFY12 results
Ezra Holdings (Ezra) reported a 61% YoY rise in 3QFY12 revenue to US$265.6m and a 244% increase in net profit to US$22.4m, such that 9MFY12 net profit accounted for 81.5% and 85.5% of ours and the street’s full-year expectations, respectively. Excluding one-off items such as fair value changes with respect to derivative instruments and foreign exchange gains, we estimate core operating profit to be around US$11m vs 2QFY12’s US$3m. Revenue increased in both the offshore support services and subsea services divisions in 3QFY12, due to contributions from an expanded vessel fleet and commencement of new projects awarded after the acquisition of AMC. Marine services, however, saw a decline of US$25.7m in turnover due to lower revenue recognized for engineering projects in Vietnam compared to 3QFY11.

Keep an eye on admin expenses
Gross margin was 17% in the last quarter compared to 16% in 2QFY12 and 18% in 3QFY11. However, administrative expenses continued to rise to US$34.0m in 3QFY12 vs US$31.7m in 2QFY12 and US$26.6m in 1QFY12. We would monitor this figure to see if the group is able to rein in costs after the acquisition of AMC.

Continues to secure contracts; outlook still positive
The group announced that it has won six contracts worth about US$87m for the charter of PSVs and AHTS vessels. The contracts have an average tenure of two years (including options) and the units will be deployed in Asia and Africa. Meanwhile, Ezra’s engineering, ship construction and fabrication services arm also clinched a US$77m contract to build a specialized offshore unit. The group remains cautiously optimistic about the outlook of the oil and gas industry, and we believe the focus going forward should be on the smooth execution of subsea projects. As we still see an upside potential of 24.3% based on our fair value estimate of S$1.35, we maintain our BUY rating on the stock.