The share price of Ezra Holdings has seen an astounding increase of about 40% in the past week. Though Ezra has clarified earlier that it was not aware nor has it been engaged on a takeover by Samsung Heavy Industries, there could possibly be other offers by potential acquirers along the way. Still, there has been no change to the company’s fundamentals since its disappointing 3QFY13 results. Looking ahead, we believe that execution risks are still not over for Ezra, despite an order book of more than US$2b, as this is susceptible to project delays and cost overruns. Without any official offer or significant contract wins, the recent price gain appears overdone. Based on fundamentals, we are retaining our fair value estimates of S$0.99, and at current price, we downgrade our rating to SELL.
Astounding 40% increase over past week
Ezra Holdings’ share price surged 40% since early last week. Prompted by a query from the SGX, it replied that it was not aware of any information that might explain the unusual trading activity.
No offer by Samsung…
There was market speculation that there may be a potential takeover offer by Samsung Heavy Industries, but Ezra had clarified earlier that it was not aware nor has it been engaged on the subject of a takeover by Samsung.
… but could this prompt other offers?
However, this does not exclude the possibility that there could be other offers by potential acquirers along the way. The recent episode has drawn market attention to Ezra’s stock, which has been a stark underperformer before the price spike amongst the offshore and marine stocks. Companies looking for strategic partnerships with a long-term view may also be prompted to do more research on Ezra’s capabilities for any acquisition opportunities.
No offer; share price gains not warranted
On the operations’ side, there has been no perceptible change since it announced a disappointing set of 3QFY13 results in mid Jul. The subsea segment had went into the red again with delays in project execution and additional costs that were previously unexpected by management. We believe execution risks remains, despite an order book of more than US$2b, as this is susceptible to project delays and cost overruns. Without a formal takeover offer or sizeable contract wins, the recent price spike appears overdone at current level. Our fair value estimate of S$0.99 is based on P/B of 0.7x (in line with its peers), although a takeover offer, if it materializes, could be a price driver depending on offer price. Based on fundamentals and at current price, we downgrade our rating to SELL.
Ezra Holdings’ share price surged 40% since early last week. Prompted by a query from the SGX, it replied that it was not aware of any information that might explain the unusual trading activity.
No offer by Samsung…
There was market speculation that there may be a potential takeover offer by Samsung Heavy Industries, but Ezra had clarified earlier that it was not aware nor has it been engaged on the subject of a takeover by Samsung.
… but could this prompt other offers?
However, this does not exclude the possibility that there could be other offers by potential acquirers along the way. The recent episode has drawn market attention to Ezra’s stock, which has been a stark underperformer before the price spike amongst the offshore and marine stocks. Companies looking for strategic partnerships with a long-term view may also be prompted to do more research on Ezra’s capabilities for any acquisition opportunities.
No offer; share price gains not warranted
On the operations’ side, there has been no perceptible change since it announced a disappointing set of 3QFY13 results in mid Jul. The subsea segment had went into the red again with delays in project execution and additional costs that were previously unexpected by management. We believe execution risks remains, despite an order book of more than US$2b, as this is susceptible to project delays and cost overruns. Without a formal takeover offer or sizeable contract wins, the recent price spike appears overdone at current level. Our fair value estimate of S$0.99 is based on P/B of 0.7x (in line with its peers), although a takeover offer, if it materializes, could be a price driver depending on offer price. Based on fundamentals and at current price, we downgrade our rating to SELL.
No comments:
Post a Comment