Turning more optimistic, TP upgrade to SGD2.33. We reiterate our Buy call and raise our target price for Ezion to SGD2.33. We are attributing a higher valuation multiple of 13x PER on FY13F earnings as we turn more optimistic on Ezion’s growth potential. We see prospects for ~60% EPS growth per year over FY13F and FY14F with room for upside adjustments.

Reviving Melville Island marine supply base. In an earlier report dated 20 Sep 2012, we highlighted that Ezion’s marine supply base business have been forgotten. This is now being revived as Ezion received endorsements to proceed with its marine supply base project on Melville Island, in the Northern Territory of Australia. Ezion had secured a lease on the supply base back in July 2010, but the project has been put on hold until now. The supply base could start contributing to revenue from as early as end-2013 and we see strong growth potential in the future given the growing volume of offshore oil and gas projects in Australia.

USD18m gain from disposal of stake in OMSA. Separately, Ezion is selling its 33.3% stake in Offshore Marine Alliance (OMSA) to its JV partners for AUD35m. This would result in a one-off gain of about USD18m. OMSA is a JV company established in 2009 with Pacific Basin Shipping and Skilled Group to carry out offshore logistics support for the Gorgon LNG project in Australia. The receipt of AUD35m cash from the sale would cover the USD30m capex required for development works in the Melville supply base before it starts operations.

Busy years ahead. 2013 is working out to be another significant year for Ezion after a year of record contract wins in 2012. Ezion has solved short-term funding problems with the recent credit line from DBS, which would allow it to take on more projects on a 100% basis and rely less on JVs. The marine supply base business adds another attractive avenue of growth. We also note that Ezion has not unveiled detailed plans for YHM yet after acquiring a stake in the latter, and this could be another stock price catalyst.

Source: Maybank Kim Eng Research - 04 Mar 2013