Ezra Holdings reported a 28% YoY rise in revenue to US$419.2m and a 20% increase in net profit to US$10.0m in 4QFY13, bringing full year revenue and net profit to US$1.26b and US$53.6m, respectively. Stripping out one-off items such as gain on disposal of Ezion shares and other assets, we estimate a core net loss of about US$37m in FY13, vs. our full year estimate of negative US$39.7m. As of end FY13, Ezra’s total order backlog is in excess of US$2b. We have a positive outlook on the group in the long term, but with uncertain earnings growth in the near term, net gearing of 1.02x, low ROE and net profit margins of less than 5% for FY13 and 14, we think there are currently better opportunities for investors with a more favourable risk-reward ratio. Maintain SELL with S$0.99 fair value estimate, based on 0.9x FY14F NTA/share.
No surprises in 4QFY13 results
Ezra Holdings reported a 28% YoY rise in revenue to US$419.2m and a 20% increase in net profit to US$10.0m in 4QFY13, bringing full year revenue and net profit to US$1.26b and US$53.6m, respectively. Stripping out one-off items such as gain on disposal of Ezion shares and other assets, we estimate a core net loss of about US$37m in FY13, vs. our full year estimate of negative US$39.7m.
Waiting to see more earnings sustainability
Though gross profit margin was 18% in 4QFY13 compared to 22% in 4QFY12, it at least recovered from the low of 1% in 3QFY13. This was mainly due to a normalization in operating activity in the subsea and offshore support business with higher vessel utilisation rates. We understand that utilisation rates in the offshore support segment was around 94% in 4QFY13, though gross profit margin remained in the 20% region. As the subsea division executed more projects in 4QFY13, which is a seasonally better quarter, the segment recovered from a net loss in 3QFY13 to an estimated US$7-8m net profit in 4QFY13; gross profit margin was in the mid-teens. However, we believe execution risk remains, despite a sizeable order book, as this is susceptible to project delays and cost overruns.
New CFO appointed
Meanwhile, the group has appointed Mr. Eugene Cheng (joined as GM for Finance in Oct 2012) to take on the role of CFO with effect from 1 Nov 2013. Mr. Tay Chin Kwang, the current Finance Director, will be re-designated as an Executive Director of Ezra.
Better investment opportunities out there
As of end FY13, Ezra’s total order backlog is in excess of US$2b, of which subsea accounts for about US$1.25b. We have a positive outlook on Ezra in the long term, but meanwhile time will be needed for Ezra’s subsea business to achieve a stronger footing. With uncertain earnings growth in the near term, net gearing of 1.02x, low ROE and net profit margins of less than 5% for FY13 and 14, we think there are currently better opportunities for investors with a more favourable risk-reward ratio. Maintain SELL with S$0.99 fair value estimate, based on 0.9x FY14F NTA/share.
Ezra Holdings reported a 28% YoY rise in revenue to US$419.2m and a 20% increase in net profit to US$10.0m in 4QFY13, bringing full year revenue and net profit to US$1.26b and US$53.6m, respectively. Stripping out one-off items such as gain on disposal of Ezion shares and other assets, we estimate a core net loss of about US$37m in FY13, vs. our full year estimate of negative US$39.7m.
Waiting to see more earnings sustainability
Though gross profit margin was 18% in 4QFY13 compared to 22% in 4QFY12, it at least recovered from the low of 1% in 3QFY13. This was mainly due to a normalization in operating activity in the subsea and offshore support business with higher vessel utilisation rates. We understand that utilisation rates in the offshore support segment was around 94% in 4QFY13, though gross profit margin remained in the 20% region. As the subsea division executed more projects in 4QFY13, which is a seasonally better quarter, the segment recovered from a net loss in 3QFY13 to an estimated US$7-8m net profit in 4QFY13; gross profit margin was in the mid-teens. However, we believe execution risk remains, despite a sizeable order book, as this is susceptible to project delays and cost overruns.
New CFO appointed
Meanwhile, the group has appointed Mr. Eugene Cheng (joined as GM for Finance in Oct 2012) to take on the role of CFO with effect from 1 Nov 2013. Mr. Tay Chin Kwang, the current Finance Director, will be re-designated as an Executive Director of Ezra.
Better investment opportunities out there
As of end FY13, Ezra’s total order backlog is in excess of US$2b, of which subsea accounts for about US$1.25b. We have a positive outlook on Ezra in the long term, but meanwhile time will be needed for Ezra’s subsea business to achieve a stronger footing. With uncertain earnings growth in the near term, net gearing of 1.02x, low ROE and net profit margins of less than 5% for FY13 and 14, we think there are currently better opportunities for investors with a more favourable risk-reward ratio. Maintain SELL with S$0.99 fair value estimate, based on 0.9x FY14F NTA/share.
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