Continues to deliver, 3Q13 within expectations. 3Q13 recuring net profit came in at USD36.2m (+131% YoY, +9% QoQ) on revenue  of USD76.2m (+97% YoY, +13% QoQ). The deployment of more  liftboat units (3Q13: 15 units, 2Q13: 13 units) and a full quarter contribution  from all three Australia LNG projects (QCLNG, APLNG, GLNG) supported the strong performance. 3Q13 margins also held steady at 48.2% (2Q13: 46.3%, 3Q12: 48.2%).

Vessel deployment updates. One of the existing units chartered to Maersk Oil will be taken out of service for upgrade at the client request. This leads to a temporary loss of income and the amortisation of upgrade cost (up to USD10m). Mitigating this is the extension of contract by the client and a ~10% higher charter rate for the unit. On a more positive note, three additional liftboat units would start contributing from 4Q13. Ezion would also be reshuffling other vessels in order to enhance the effectiveness of the fleet to match client requirements.

Strategic focus for 2014. Ezion highlighted three strategic focal  points for FY14: (1) more time charters over bareboat charters, (2) greater focus on SEA region, and (3) more newbuild units instead of refurbish units. Based on its current balance sheet (net gearing: 1.05x) and future cash flows, it should be able to comfortably take on another two units without additional funding. However, it does not rule out taking on more debt or engage in other financing methods if there is demand but would keep gearing below the 1.2-1.3x level.

Reiterate Buy, TP SGD2.50 unchanged. We fine tuned our FY03-15 forecasts marginally on vessel deployment schedule. Our SGD2.50 TP is based on higher-than-peer FY14 PER of 11x. We continue to like Ezion for its (1) strong recurring cashflow generated by the liftboat business; (2) new growth driver from Marine Supply Base business; and (3) attractive valuation at 8.9x FY14 PER against a 75% FY14EPS growth.

Source: Maybank Kim Eng Research - 18 Nov 2013