We are seeing more activity in Ezion’s SGX-listed associates recently. 41.5%-owned Charisma Energy has announced several contracts recently, and there have been senior management changes in both Charisma and another associate, JK Tech. Currently, both companies are still at their early stages of development, and we have not factored Ezion’s stakes in these companies in our fair value estimate. In the longer term, however, there is potential growth if 1) Ezion continues to refer non-core energy-related business introduced by existing clients to these associates and 2) there is good execution by the management teams of the respective companies. Meanwhile, post Ezion’s bonus issue of shares, our fair value estimate drops from S$2.78 to S$2.31 (based on 12x blended FY14/15F earnings). Maintain BUY with 26% upside potential.
Associate Charisma Energy secures more contracts lately
We are seeing more activity in Ezion’s 41.5%-owned associate, Charisma Energy, lately. Recall that Ezion obtained a substantial stake in the company in 4Q12, following which there was relatively insignificant new business activity, save for a semi-sub rig lease contract (announced Sep 2013 but later terminated in Mar 2014) and a US$37m contract for hydro-electric power generation in 2013. This year, however, there seems to be a ramp up in activity: 1) a US$180m contract (15yr) for the leasing of hydro-electric power generation equipment was secured in Mar, 2) a US$276m contract (7-year) to provide a modular crude oil processing facility was announced in Aug, and 3) a US$72m contract (7-year) to provide five OSVs was announced in Sep.
Senior management changes in associates
Another significant event is the series of management changes at the senior level – Mr. Woo (CEO) will be the Director of Special Projects at Ezion, while his deputy, Mr. Tan, will become the new CEO of Charisma. The current Financial Controller of Ezion, Mr. Goon, will be the new CFO of Charisma, while the ex-CEO of Triyards, Mr. Wong, will be the Executive Director of Charisma. These changes were announced in early Sep. Meanwhile, Ezion’s other SGX-listed associate, JK Tech, also saw a change in CFO and Chairman of the Board in early Sep as well.
Looking at long-term growth
Currently, Charisma Energy and JK Tech are still at their early stages of development, and Ezion’s stakes in these companies have not been factored into our fair value estimate. There is, however, potential growth in the longer term if 1) Ezion continues to refer non-core energy related business introduced by existing clients to these associates and 2) there is good execution by the management teams of the respective companies. Meanwhile, post Ezion’s bonus issue of shares, our fair value estimate drops from S$2.78 to S$2.31 (based on 12x blended FY14/15F earnings). Maintain BUY with 26% upside potential.
We are seeing more activity in Ezion’s 41.5%-owned associate, Charisma Energy, lately. Recall that Ezion obtained a substantial stake in the company in 4Q12, following which there was relatively insignificant new business activity, save for a semi-sub rig lease contract (announced Sep 2013 but later terminated in Mar 2014) and a US$37m contract for hydro-electric power generation in 2013. This year, however, there seems to be a ramp up in activity: 1) a US$180m contract (15yr) for the leasing of hydro-electric power generation equipment was secured in Mar, 2) a US$276m contract (7-year) to provide a modular crude oil processing facility was announced in Aug, and 3) a US$72m contract (7-year) to provide five OSVs was announced in Sep.
Senior management changes in associates
Another significant event is the series of management changes at the senior level – Mr. Woo (CEO) will be the Director of Special Projects at Ezion, while his deputy, Mr. Tan, will become the new CEO of Charisma. The current Financial Controller of Ezion, Mr. Goon, will be the new CFO of Charisma, while the ex-CEO of Triyards, Mr. Wong, will be the Executive Director of Charisma. These changes were announced in early Sep. Meanwhile, Ezion’s other SGX-listed associate, JK Tech, also saw a change in CFO and Chairman of the Board in early Sep as well.
Looking at long-term growth
Currently, Charisma Energy and JK Tech are still at their early stages of development, and Ezion’s stakes in these companies have not been factored into our fair value estimate. There is, however, potential growth in the longer term if 1) Ezion continues to refer non-core energy related business introduced by existing clients to these associates and 2) there is good execution by the management teams of the respective companies. Meanwhile, post Ezion’s bonus issue of shares, our fair value estimate drops from S$2.78 to S$2.31 (based on 12x blended FY14/15F earnings). Maintain BUY with 26% upside potential.
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