Healthy progress, Maintain Buy. 1Q13 report card reveals healthy progress in Ezion’s businesses. Our forecast of 51% growth in FY13F EPS and a CAGR of 40% over FY13-15F remain well on track to be met. These high growth expectations are primarily backed by secured charter contracts limiting the risk of major misses. We believe that previous concerns on high gearing have mostly dissipated as Ezion demonstrates astute use of its capital. We maintain our Buy call, raising our valuation multiple to 15x FY13F PER (from 13x), TP at SGD2.56.

Results within expectations. 1Q13 results were within our expectations with revenue of USD54.8m (+79% YoY, +5% QoQ) and reported net profit of USD46.2m (+228% YoY, +125% QoQ), which makes up 27% of our previous FY13F forecasts. Stripping out one-time gain of USD17.8m from disposal of OMSA, recurring net profit would be about USD28.4m. The better performance was due to increased contributions from 3 liftboat units (2 under JVs), and logistic support services for the QCLNG and APLNG projects.

Gearing to trend up, but market now less worried. Net gearing has risen to 0.83x in 1Q13 and is expected to rise further in subsequent quarters as capex needs lead to requirement for higher level of debt. However, we note that past market concerns on Ezion’s high gearing seems have eased as the company has demonstrated strong ability in capital usage, generating high ROEs of 30-40% for its liftboat business. Sequential growth expected. We see sequential quarterly growth as more liftboat units are deployed. The Myanmar unit (unit 12) is delayed for about 2 months due to some reconfiguration, but Ezion see possibility of receiving partial compensation for the lost revenue opportunity.

Maintain Buy, TP raised to SGD2.56. We raise our valuation multiple to 15x PER as we see concerns on high gearing easing and greater confidence that the company could deliver the high growth expectations. Further catalysts would come from (1) more contract wins, (2) positive developments in YHM, (3) positive developments in marine supply base business.

Source: Maybank Kim Eng Research - 10 May 2013