2Q13 within expectations, reiterate Buy. 2Q13 net profit of USD36.2m (+29% YoY, -21% QoQ) was within our expectations. The lower QoQ performance was due to a USD18m one-off gain from divestment of OMSA in 1Q13. Excluding this, 2Q13 net profit would have been higher by 28% QoQ. 1H13 net profit made up about 49% of our previous FY13F forecast. Ezion also declared a 1-for-5 bonus share issue. Maintain Buy, TP raised to SGD3.00 (SGD2.50 post bonus issue), pegged to 11x FY14F earnings.

More liftboat units and Australian LNG projects contributing. We saw contributions from all its three Australian LNG projects (QCLNG, GLNG, APLNG) this quarter. There were also contributions from 2 additional units of liftboat/service rig units. There should be another 5 more units adding to charter income in 2H13 of which most would likely be from 4Q13. We expect to see a 71% jump in recurring FY14F EPS as more units start their charters in 2014.

Need more funding for additional contracts. Net gearing as at 2Q13 has reached 1.01x (1Q13:0.83x). Ezion would likely need more funding if it decides to take on any subsequent liftboat/service rig contracts this year. However, it states that it would refrain from raising funds through share issuance, but would likely explore various debt instruments. With 7 new liftboat/service rigs contracts with total value of USD601m secured YTD, we see likelihood of another 2-3 units this year.

Other developments could be brewing. We believe that there would be more developments that could add to further share price appreciation. It has not yet announced any concrete plans for its associate YHM. Additionally, we believe that Ezion may have greater plans for its Marine supply base business.

Reiterate Buy, TP raised to SGD3.00. We reduce our FY13-15F net profit forecasts by between 1-3% as we adjust for revised contribution schedules, lowered revenue but higher gross margins. We maintain our positive view on the company with TP raised to SGD3.00 as we roll over our valuations to FY14F diluted earnings, but pegged to a lower PER of 11x as the high growth phase would be moderating down.

Source: Maybank Kim Eng Research - 12 Aug 2013