Results within expectations. 2Q12 results were boosted by a
USD13.8m gain on divestment of a liftboat unit while JV income was
28% lower QoQ at USD2.7m as it was negatively affected by translation
losses due to depreciation of USD against Euro. Excluding these
effects, 2Q12 results were generally within expectations. Revenue
came in at USD37.2m (+41% YoY, +21% QoQ) with corresponding net
profit of USD28.1m (+130% YoY, +100% QoQ).
Expect a stronger 2H12. We expect a stronger core performance for 2H12 as contributions for its QCLNG project should kick in, as well as the deployment of unit-10, unit-11, and unit-12 service rigs and unit-14 liftboat in 2H12. Gross margins are expected to be sustained at current levels of 45-46%.
Bumper year of contract wins. This has been a bumper year in terms of contract wins for Ezion with almost one new contract win a month. In addition to the USD71m APLNG marine logistics contract announced last week, Ezion has secured a 5-year USD80m service rig contract and signed another letter of intent to provide another service rig for USD87.6m over a 4-year period.
Gearing and funding. We believe that Ezion has the financial resources to fund its current projects. It established a SGD500m debt issuance programme earlier this year which we expect to be drawn down to fund requirements for its projects. This would drive net gearing up to near 100% by end 2012. However, increasing operating cashflows as more units are deployed and projects get started should ease the gearing level subsequently. We expect it to turn free cashflow positive in FY14F. If it secures more projects, it may need to look at more funding sources, and making a sale-and-leaseback of its existing units is one option it may look at.
Strong earnings growth, Reiterate BUY. Strong project pipelines which should see earnings grow by a CAGR of 36% over the next 3 years. Our target price, pegged at 0.3x PEG, is raised to SGD1.42, on higher potential earnings from the new contracts.
Expect a stronger 2H12. We expect a stronger core performance for 2H12 as contributions for its QCLNG project should kick in, as well as the deployment of unit-10, unit-11, and unit-12 service rigs and unit-14 liftboat in 2H12. Gross margins are expected to be sustained at current levels of 45-46%.
Bumper year of contract wins. This has been a bumper year in terms of contract wins for Ezion with almost one new contract win a month. In addition to the USD71m APLNG marine logistics contract announced last week, Ezion has secured a 5-year USD80m service rig contract and signed another letter of intent to provide another service rig for USD87.6m over a 4-year period.
Gearing and funding. We believe that Ezion has the financial resources to fund its current projects. It established a SGD500m debt issuance programme earlier this year which we expect to be drawn down to fund requirements for its projects. This would drive net gearing up to near 100% by end 2012. However, increasing operating cashflows as more units are deployed and projects get started should ease the gearing level subsequently. We expect it to turn free cashflow positive in FY14F. If it secures more projects, it may need to look at more funding sources, and making a sale-and-leaseback of its existing units is one option it may look at.
Strong earnings growth, Reiterate BUY. Strong project pipelines which should see earnings grow by a CAGR of 36% over the next 3 years. Our target price, pegged at 0.3x PEG, is raised to SGD1.42, on higher potential earnings from the new contracts.
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