Ezion Holdings

OCBC on 10 May 2012

Ezion Holdings (Ezion) reported a 42.3% YoY rise in revenue to US$30.6m and a 37.4% drop in net profit to US$14.1m in 1Q12. However, note that 1Q11 was boosted by a disposal gain from a liftboat; excluding that, core net profit actually rose 23% YoY. Ezion’s results were in line with our expectations. The group also announced that it has clinched its 3rd major LNG-related project in Australia since 2009 and has established a S$500m debt programme. For the rest of this year, we understand that Ezion will focus on execution at places like Indonesia and Australia, as well as planning ahead for 2014 and beyond. We have taken the latest contract into account in our estimates but with recent weakness in market sentiment which has impacted valuations of the broader industry, we lower our peg from 10x to 9x blended FY12/13F core earnings, resulting in a lower fair value estimate of S$1.13. Maintain BUY.

1Q12 results in line with expectations
Ezion Holdings (Ezion) reported a 42.3% YoY rise in revenue to US$30.6m and a 37.4% drop in net profit to US$14.1m in 1Q12. However, note that 1Q11 was boosted by a disposal gain from a liftboat; excluding that, core net profit actually rose 23% YoY. Ezion’s results were in line with our expectations as net profit accounted for 20% of our full year estimate; we are expecting a one-off gain from a sale and leaseback transaction in the group’s 2Q12 results and 2H12 should see further growth in core earnings.

3rd major LNG-related project in Australia
Ezion also announced that it has clinched its 3rd major LNG-related project in Australia since 2009. Though the final scope and contract value have not been finalized, it is likely that it will be similar to the earlier one that Ezion secured in Aug last year. We estimate annual revenue contributions of about US$30-35m per year starting in Feb 2013.

Establishes S$500m debt programme
Meanwhile the group has established a S$500m multicurrency debt issuance programme. We believe that Ezion may prefer the more traditional bonds for now instead of perpetual securities where the interest cost is likely higher, possibly around 8-9%. Our model assumes that the group would raise about US$50-100m from the debt programme by the next quarter.

BUY on recent price weakness
For the rest of this year, we understand that Ezion will focus on execution at places like Indonesia and Australia, as well as planning ahead for 2014 and beyond. We have taken the latest contract into account in our estimates but with recent weakness in market sentiment which has impacted valuations of the broader industry, we lower our peg from 10x to 9x blended FY12/13F core earnings, resulting in a lower fair value estimate of S$1.13. Maintain BUY.