Ezra Holdings reported a 49% YoY rise in revenue to US$326.3m but saw a 41% decrease in net profit to US$7.3m in 4QFY12, such that full year net profit of US$65m was ~15% below our full year estimate. Core net profit of US$15.7m accounted for 90% of our estimate. This was partly due to higher administrative expenses and a higher tax rate. We expect admin expenses to remain elevated going forward. On a more positive note, management expects an increase in margins in FY13 as offshore support and subsea vessel utilisation rises, along with higher margins for new contracts. The group has a total bid book of US$4.4b, in which a significant portion is expected to be awarded in FY13. After adjusting our estimates and accounting for the listing of Triyards, our fair value estimate for Ezra drops to S$1.30. Maintain BUY.
Earnings below; impacted by admin costs and tax
Ezra Holdings reported a a 49% YoY rise in revenue to US$326.3m but saw a 41% decrease in net profit to US$7.3m in 4QFY12, such that full year net profit of US$65m was ~15% below our full year estimate. Core net profit of US$15.7m accounted for 90% of our estimate of US$17.4m. This was partly due to significantly higher administrative expenses in the quarter – the group incurred US$43m admin costs in 4QFY12 vs US$28m in 4QFY11. The tax rate of 25% in FY12 was also higher than 18.1% in FY11 due to withholding tax expenses incurred by vessels in certain geographical regions.
Staff costs to remain elevated, but there are other positives too
The high administrative expenses were mainly due to geographical expansion of the subsea services division and higher personnel cost to support Ezra’s growing business. Management believes that admin expenses will stay around the US$40-45m range going forward, higher than previously guided. On a more positive note, the group expects an increase in margins in FY13 as offshore support (FY12: 90%, FY13F: 95%) and subsea (FY12: ~70%, FY13F: ~89%) vessel utilisation rises, along with higher margins for new contracts compared to those secured previously.
US$4.4b total bid book; 30-40% hit rate
Ezra’s subsea net order book stands at about US$700-800m, excluding new projects won but not yet announced due to client agreements. The group has a total bid book of US$4.4b, in which a significant portion is expected to be awarded in FY13. Management expects a success rate of 30-40%. Meanwhile the listing of Triyards resulted in our fair value estimate for Ezra to drop from S$1.48 to S$1.40 previously. After tweaking our estimates to account for higher administrative costs (~US$46m/quarter in FY13) and incorporating a tax rate of 17% (higher than management’s guidance of 15%), our fair value estimate slips further from S$1.40 to S$1.30. Maintain BUY.
Ezra Holdings reported a a 49% YoY rise in revenue to US$326.3m but saw a 41% decrease in net profit to US$7.3m in 4QFY12, such that full year net profit of US$65m was ~15% below our full year estimate. Core net profit of US$15.7m accounted for 90% of our estimate of US$17.4m. This was partly due to significantly higher administrative expenses in the quarter – the group incurred US$43m admin costs in 4QFY12 vs US$28m in 4QFY11. The tax rate of 25% in FY12 was also higher than 18.1% in FY11 due to withholding tax expenses incurred by vessels in certain geographical regions.
Staff costs to remain elevated, but there are other positives too
The high administrative expenses were mainly due to geographical expansion of the subsea services division and higher personnel cost to support Ezra’s growing business. Management believes that admin expenses will stay around the US$40-45m range going forward, higher than previously guided. On a more positive note, the group expects an increase in margins in FY13 as offshore support (FY12: 90%, FY13F: 95%) and subsea (FY12: ~70%, FY13F: ~89%) vessel utilisation rises, along with higher margins for new contracts compared to those secured previously.
US$4.4b total bid book; 30-40% hit rate
Ezra’s subsea net order book stands at about US$700-800m, excluding new projects won but not yet announced due to client agreements. The group has a total bid book of US$4.4b, in which a significant portion is expected to be awarded in FY13. Management expects a success rate of 30-40%. Meanwhile the listing of Triyards resulted in our fair value estimate for Ezra to drop from S$1.48 to S$1.40 previously. After tweaking our estimates to account for higher administrative costs (~US$46m/quarter in FY13) and incorporating a tax rate of 17% (higher than management’s guidance of 15%), our fair value estimate slips further from S$1.40 to S$1.30. Maintain BUY.
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