Ezion in KL. We hosted Ezion for a NDR in KL last week. The event garnered strong interests from various institutional funds. Investors were encouraged by the company’s sturdy performance. Judging from the issues raised, we sense that the key concern was how long Ezion could maintain its strong growth trajectory. We maintain our positive view on the company with a Buy call and TP of SGD3.00, pegged to 11x FY14F PER.

Key issues raised and takeaways are as follows.

Investors wanted to know how many more liftboats can Ezion continue to add. While we mentioned before that a fleet size of 32-35 may be optimal, Ezion believes that if there is market demand, the company would continue to take in more contracts as long as it can secure funding without over risking its balance sheet. We see this as a positive indication that growth momentum may not taper as soon as we thought. The SEA, Middle East and West Africa regions remain open for more liftboats given the relatively low adoption of such units as compared to matured markets

Competition for liftboats was also a commonly raised concern. Ezion possess a first mover advantage in this region and there is currently no meaningful competition. This business is related to the often neglected service and maintenance part of the oilfield lifecycle. Many oil and gas services companies tend to prefer to offer services that target oil companies’ capex spending, which accounts for the majority of the latter’s spending budget. For these reasons, competition for Ezion’s liftboat business has not been intense despite the attractive ROEs.

Marine supply base on Melville Island is underway to be operational by the end of 2013, adding a new revenue stream. In addition, we believe there could be potential for further developments and growth in this business.

Ezion is comfortable with net gearing of about 1.2x. It emphasised that banks are comfortable with providing funding for its projects given the reliability of the cashflows from Ezion’s clients, who are reputable NOCs/IOCs.

Source: Maybank Kim Eng Research - 23 Sep 2013