Ezra Holdings (Ezra) reported a 54% YoY rise in revenue to US$278.7m and a 44% rise in gross profit to US$49.9m in 1QFY13. But higher administrative expenses, a lower share of profit of associated companies, and a higher tax rate led to a 49% fall in net profit to US$6.8m. Though the fall in core net profit is lower at 16%, the 1QFY13 amount of US$4.3m represents only about 13% of our full year core net profit estimate of US$33m, which is already one of the lowest in the street. Still, we expect better performance in 2HFY13 as the subsea division continues to grow. Ezra’s share price has run up by about 18.5% since our last report on 3 Dec 2012. Due to limited upside potential, we downgrade our rating to HOLD.
Soft 1QFY13 results
Ezra Holdings (Ezra) reported a 54% YoY rise in revenue to US$278.7m and a 44% rise in gross profit to US$49.9m in 1QFY13. But higher administrative expenses, a lower share of profit of associated companies, and a higher tax rate led to a 49% fall in net profit to US$6.8m. Stripping out exceptional items such as fair value changes of financial instruments and forex changes, we estimate core net profit to be around US$4.3m, 16% lower than 1QFY12. This represents only about 13% of our full year core net profit estimate of US$33m, which is already one of the lowest in the street.
Secures contracts for subsea and marine work
The group also announced new contract wins worth up to US$160m for several projects, including 1) US$85m of subsea work for an oil major in Asia Pacific, a client in Malaysia and exercise of options and variation orders for Statoil, and 2) five charter contracts worth about US$75m (average tenor 2.6 years, including options).
Order book remains healthy
The outstanding order book for the subsea division stood at US$850m as of end 1QFY13, while the total bid book remains at about US$4.4b. We estimate about 60% of the
US$4.4b amount may be awarded in FY13, with a success rate of 35%. This translates to an estimated new order win of about US$925m for the subsea division in FY13. We estimate Ezra has secured about 48% of our new order win assumption.
Limited upside; downgrade to HOLD
Despite the soft 1QFY13 results, we expect better performance in 2HFY13 as margins in the subsea segment improve. However, as Ezra’s share price has run up by about 18.5% since our last report on 3 Dec 2012, we now see limited upside potential to our fair value estimate of S$1.30. Downgrade to HOLD.
Ezra Holdings (Ezra) reported a 54% YoY rise in revenue to US$278.7m and a 44% rise in gross profit to US$49.9m in 1QFY13. But higher administrative expenses, a lower share of profit of associated companies, and a higher tax rate led to a 49% fall in net profit to US$6.8m. Stripping out exceptional items such as fair value changes of financial instruments and forex changes, we estimate core net profit to be around US$4.3m, 16% lower than 1QFY12. This represents only about 13% of our full year core net profit estimate of US$33m, which is already one of the lowest in the street.
Secures contracts for subsea and marine work
The group also announced new contract wins worth up to US$160m for several projects, including 1) US$85m of subsea work for an oil major in Asia Pacific, a client in Malaysia and exercise of options and variation orders for Statoil, and 2) five charter contracts worth about US$75m (average tenor 2.6 years, including options).
Order book remains healthy
The outstanding order book for the subsea division stood at US$850m as of end 1QFY13, while the total bid book remains at about US$4.4b. We estimate about 60% of the
US$4.4b amount may be awarded in FY13, with a success rate of 35%. This translates to an estimated new order win of about US$925m for the subsea division in FY13. We estimate Ezra has secured about 48% of our new order win assumption.
Limited upside; downgrade to HOLD
Despite the soft 1QFY13 results, we expect better performance in 2HFY13 as margins in the subsea segment improve. However, as Ezra’s share price has run up by about 18.5% since our last report on 3 Dec 2012, we now see limited upside potential to our fair value estimate of S$1.30. Downgrade to HOLD.
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