Ezion Holdings reported a 24.9% YoY rise in revenue to US$104.6m and a 106.6% increase in net profit to US$83.7m in 4Q14, boosted by a US$34.9m disposal gain in the quarter. Stripping that out, full year core income was US$188m vs. our estimate of US$190m. Out of the five units coming up for renewal this year, the first unit has been renewed at the same rate for another two years. We are expecting renewal rates for the remaining units to be similar to previous rates or at most 5% lower. Meanwhile, Ezion’s net gearing has dropped to 0.86x as at end FY14. We have tweaked our earnings estimates to incorporate downtime for unit 9 due to a bad weather accident, as well as repair work required for the Chinese unit (liftboat 13). Along with depressed valuations of oil and gas peers, we use a lower P/E of 9x, such that our fair value is lowered from S$2.04 to S$1.75, aided by the assumption of a stronger USD (US$1 = S$1.35). Maintain BUY.
FY14 results in line
Ezion Holdings reported a 24.9% YoY rise in revenue to US$104.6m and a 106.6% increase in net profit to US$83.7m in 4Q14, boosted by a US$34.9m disposal gain in the quarter. Stripping that out, recurring income was US$48.8m in 4Q14. This brings full year core income to US$188m vs. our estimate of US$190m, in line with our expectations. Gross profit margin in the quarter remained healthy at 50.6% compared to 51.0% in 3Q14 and 48.7% in 4Q13.
Five units coming up for renewal in 2015
Out of the five units coming up for renewal this year, the first one (unit 1) has been renewed at the same rate for another two years. We are expecting renewal rates for the remaining units to be similar to previous rates or at most 5% lower. So far, management has not obtained any written requests from customers (for units that are currently chartered out) for any rate reductions.
Has one of the best earnings visibilities among O&G companies
With 37 contracts, Ezion has grown its fleet to a sizeable figure. The group mostly deals with national oil companies (e.g. Pertamina, Petronas, PEMEX) and international companies (e.g. Maersk, Exxon), and has a well-diversified portfolio in Asia, West Africa and the North Sea. Ezion’s rigs are also mainly used in the maintenance phase of the offshore oil and gas industry, rather than the drilling phase, and have been relatively more resilient under this current low oil price environment.
Lower net gearing at 0.86x
With the disposal of the marine business to Ausgroup and ongoing earnings contribution, Ezion’s net gearing has dropped from 1.15x as at end FY13 to 0.86x as at end FY14. We have tweaked our earnings estimates to incorporate downtime for unit 9 due to a bad weather accident, as well as repair work required for the Chinese unit (liftboat 13). Along with depressed valuations of oil and gas peers, we use a lower P/E of 9x, such that our fair value is lowered from S$2.04 to S$1.75, aided by the assumption of a stronger USD (US$1 = S$1.35). Maintain BUY.
Ezion Holdings reported a 24.9% YoY rise in revenue to US$104.6m and a 106.6% increase in net profit to US$83.7m in 4Q14, boosted by a US$34.9m disposal gain in the quarter. Stripping that out, recurring income was US$48.8m in 4Q14. This brings full year core income to US$188m vs. our estimate of US$190m, in line with our expectations. Gross profit margin in the quarter remained healthy at 50.6% compared to 51.0% in 3Q14 and 48.7% in 4Q13.
Five units coming up for renewal in 2015
Out of the five units coming up for renewal this year, the first one (unit 1) has been renewed at the same rate for another two years. We are expecting renewal rates for the remaining units to be similar to previous rates or at most 5% lower. So far, management has not obtained any written requests from customers (for units that are currently chartered out) for any rate reductions.
Has one of the best earnings visibilities among O&G companies
With 37 contracts, Ezion has grown its fleet to a sizeable figure. The group mostly deals with national oil companies (e.g. Pertamina, Petronas, PEMEX) and international companies (e.g. Maersk, Exxon), and has a well-diversified portfolio in Asia, West Africa and the North Sea. Ezion’s rigs are also mainly used in the maintenance phase of the offshore oil and gas industry, rather than the drilling phase, and have been relatively more resilient under this current low oil price environment.
Lower net gearing at 0.86x
With the disposal of the marine business to Ausgroup and ongoing earnings contribution, Ezion’s net gearing has dropped from 1.15x as at end FY13 to 0.86x as at end FY14. We have tweaked our earnings estimates to incorporate downtime for unit 9 due to a bad weather accident, as well as repair work required for the Chinese unit (liftboat 13). Along with depressed valuations of oil and gas peers, we use a lower P/E of 9x, such that our fair value is lowered from S$2.04 to S$1.75, aided by the assumption of a stronger USD (US$1 = S$1.35). Maintain BUY.
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