Ezion Holdings reported a 24.5% YoY rise in revenue to US$94.9m and a 28.9% increase in net profit to US$49.2m in 3Q14, such that 9M14 net profit accounted for 73% and 68% of ours and the street’s full year estimates, respectively. Besides announcing the completion of the disposal of its port and marine supply base business to Ausgroup, Ezion also entered into an agreement with Triyards in which Triyards will issue 29.5m non-listed warrants to Ezion for a token consideration of S$1. Triyards had previously built liftboats for Ezion and it is hence not surprising to see this latest development. Ezion services the production phase of the shallow water segment in the offshore industry, which is relatively resilient in the face of lower oil prices. However, with the de-rating of the broader sector, we lower our P/E from 12x to 11x earnings, and even as we roll forward our valuations to FY15F, our fair value estimate slips slightly from S$2.31 to S$2.25. Maintain BUY.
3Q14 results within our expectations
Ezion Holdings reported a 24.5% YoY rise in revenue to US$94.9m and a 28.9% increase in net profit to US$49.2m in 3Q14, such that 9M14 net profit accounted for 73% and 68% of ours and the street’s full year estimates, respectively. Results were in line with our expectations. Gross margin remained strong at 51.0% in 3Q14 vs. 48.2% in 3Q13 and 51.1% in 2Q14.
Completes disposal to Ausgroup
The stock was halted since Thursday morning, and during this time, the company announced that the disposal of Ezion Offshore Logistics Hub and Teras Australia Pty Ltd to Ausgroup have been completed. We estimate this would result in at least a US$30m disposal gain which would be booked in the upcoming 4Q14 results.
Aims to take stake in Triyards
The more significant news, however, is that Ezion also announced that it has entered into a subscription agreement in which Triyards Holdings will issue 29.5m non-listed warrants to Ezion for a token consideration of S$1. Each warrant shall carry the right to subscribe for one share of Triyards at an exercise price of US$0.563/share. Assuming the warrants are fully exercised, the shares will represent ~9.09% of the existing share capital of Triyards. An exercise condition, however, is that Triyards must have entered into shipbuilding contracts of at least US$150m, as well as engineering services work within 120 days from 10 Nov 2014 with either Ezion or customers referred by Ezion. Triyards had previously built liftboats for Ezion and it is hence not surprising to see this latest development.
Maintain BUY
Ezion services the production phase of the shallow water segment in the offshore industry, which is relatively resilient in the face of lower oil prices. However, with the de-rating of the broader sector, we lower our P/E from 12x to 11x earnings, and even as we roll forward our valuations to FY15F, our fair value estimate slips slightly from S$2.31 to S$2.25. Maintain BUY.
Ezion Holdings reported a 24.5% YoY rise in revenue to US$94.9m and a 28.9% increase in net profit to US$49.2m in 3Q14, such that 9M14 net profit accounted for 73% and 68% of ours and the street’s full year estimates, respectively. Results were in line with our expectations. Gross margin remained strong at 51.0% in 3Q14 vs. 48.2% in 3Q13 and 51.1% in 2Q14.
Completes disposal to Ausgroup
The stock was halted since Thursday morning, and during this time, the company announced that the disposal of Ezion Offshore Logistics Hub and Teras Australia Pty Ltd to Ausgroup have been completed. We estimate this would result in at least a US$30m disposal gain which would be booked in the upcoming 4Q14 results.
Aims to take stake in Triyards
The more significant news, however, is that Ezion also announced that it has entered into a subscription agreement in which Triyards Holdings will issue 29.5m non-listed warrants to Ezion for a token consideration of S$1. Each warrant shall carry the right to subscribe for one share of Triyards at an exercise price of US$0.563/share. Assuming the warrants are fully exercised, the shares will represent ~9.09% of the existing share capital of Triyards. An exercise condition, however, is that Triyards must have entered into shipbuilding contracts of at least US$150m, as well as engineering services work within 120 days from 10 Nov 2014 with either Ezion or customers referred by Ezion. Triyards had previously built liftboats for Ezion and it is hence not surprising to see this latest development.
Maintain BUY
Ezion services the production phase of the shallow water segment in the offshore industry, which is relatively resilient in the face of lower oil prices. However, with the de-rating of the broader sector, we lower our P/E from 12x to 11x earnings, and even as we roll forward our valuations to FY15F, our fair value estimate slips slightly from S$2.31 to S$2.25. Maintain BUY.
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