Ezra Holdings’ 1QFY14 revenue grew 21.9% YoY to US$339.8m but PATMI declined 6.1% to US$6.3m. However, if we strip out exceptional items, we estimate core PATMI to come in at US$6.7m, or a 57.2% YoY jump. This formed ~20% of our FY14 core PATMI forecast, which we view as in-line with our expectations. Ezra’s Subsea Services division was its main revenue driver for 1QFY14, and management remains upbeat on prospects for this business in FY14 and FY15. Ezra’s net orderbook was >US$2b as at 30 Nov 2013, of which 50-65% belongs to its Subsea Services division. In our view, as Ezra is trading at an unexciting FY14F core PER of 30x, we maintain our SELL rating on the stock, but with a slightly higher fair value estimate of S$1.03 (previously S$0.99) as we raise our USD/SGD assumption from 1.23 to 1.27.
1QFY14 results within our expectations
Ezra Holdings reported its 1QFY14 results, with revenue growing 21.9% YoY to US$339.8m (25% of our full-year estimate) but PATMI declined 6.1% to US$6.3m. However, if we strip out exceptional items such as forex losses and a gain on dilution of interest in an associated company, we estimate core PATMI to come in at US$6.7m, or a 57.2% YoY jump. This formed ~20% of our FY14 core PATMI forecast, which we view as in-line with our expectations.
Subsea Services division the main revenue driver
Ezra’s Subsea Services division was its main revenue driver for 1QFY14, with a US$59.5m YoY revenue increase thanks to more projects undertaken, additional variation orders and contribution from two new subsea construction vessels (delivered in 4QFY13). This division also managed to record its second consecutive quarter of operational profit. Management remains upbeat on prospects for its subsea business in FY14 and FY15, and its current tender book stands at ~US$9b. On the flipside, as gross margins for its Subsea Services segment is typically the lowest among its three segments (1QFY14: 12.5-13%), this change in product mix resulted in a 3.0 ppt YoY dilution in overall gross margin to 14.9% in 1QFY14. Management also highlighted that it is exploring strategic initiatives to further strengthen its subsea business. In our view, possible options may include a listing of its Subsea Services division and/or strategic partnership with industry players. For its Marine Services division, revenue rose US$2.4m YoY but its Offshore Support Services division registered a slight US$0.8m YoY revenue decline due to vessels undergoing maintenance and repair.
Maintain SELL on expensive valuations
We retain our forecasts on Ezra given the in-line set of results. Its net orderbook was >US$2b as at 30 Nov 2013, of which 50-65% belongs to its Subsea Services division. In our view, as Ezra is trading at an unexciting FY14F core PER of 30x, we maintain our SELL rating on the stock, but with a slightly higher fair value estimate of S$1.03 (previously S$0.99) as we raise our USD/SGD assumption from 1.23 to 1.27.
Ezra Holdings reported its 1QFY14 results, with revenue growing 21.9% YoY to US$339.8m (25% of our full-year estimate) but PATMI declined 6.1% to US$6.3m. However, if we strip out exceptional items such as forex losses and a gain on dilution of interest in an associated company, we estimate core PATMI to come in at US$6.7m, or a 57.2% YoY jump. This formed ~20% of our FY14 core PATMI forecast, which we view as in-line with our expectations.
Subsea Services division the main revenue driver
Ezra’s Subsea Services division was its main revenue driver for 1QFY14, with a US$59.5m YoY revenue increase thanks to more projects undertaken, additional variation orders and contribution from two new subsea construction vessels (delivered in 4QFY13). This division also managed to record its second consecutive quarter of operational profit. Management remains upbeat on prospects for its subsea business in FY14 and FY15, and its current tender book stands at ~US$9b. On the flipside, as gross margins for its Subsea Services segment is typically the lowest among its three segments (1QFY14: 12.5-13%), this change in product mix resulted in a 3.0 ppt YoY dilution in overall gross margin to 14.9% in 1QFY14. Management also highlighted that it is exploring strategic initiatives to further strengthen its subsea business. In our view, possible options may include a listing of its Subsea Services division and/or strategic partnership with industry players. For its Marine Services division, revenue rose US$2.4m YoY but its Offshore Support Services division registered a slight US$0.8m YoY revenue decline due to vessels undergoing maintenance and repair.
Maintain SELL on expensive valuations
We retain our forecasts on Ezra given the in-line set of results. Its net orderbook was >US$2b as at 30 Nov 2013, of which 50-65% belongs to its Subsea Services division. In our view, as Ezra is trading at an unexciting FY14F core PER of 30x, we maintain our SELL rating on the stock, but with a slightly higher fair value estimate of S$1.03 (previously S$0.99) as we raise our USD/SGD assumption from 1.23 to 1.27.
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