In two separate announcements, Ezion would increase its stakes in liftboat/service rig assets which are currently not 100%-owned.

Development #1: It is increasing its stake in its 50% jointly controlled entity, "Kenai Offshore Ventures", to 100% for a consideration of USD23.95m. Kenai Offshore owns a service rig (we believe this is unit 7) which has an on-going charter contract in Alaska over the next three years 11 months. The purchase will be funded through internal resources.

Development #2: It is buying the entire stake of "Teras Conquest 4" for USD32.5m. We believe this is unit 4 of the service rig which it did a sale and leaseback back in Feb 2012. It is now repurchasing this asset which was previously sold for a lump sum of USD25m plus a leaseback commitment by Ezion for six years starting Feb 2012. The service rig was valued at USD77.5m then. Based on a back-of-envelope calculation, Ezion appears to be just paying off its outstanding leaseback commitment to regain ownership of the asset. This seems a good deal to us. This purchase will be funded through the issuance of 18.4m (1.5% of enlarged share base) new shares at an issue price of SGD2.2407/sh. We estimate a slightly less than 2% EPS accretion. This will allow Ezion to re-flag the vessel, putting it in a better position to renew the charters.

A move towards the right direction; reiterate Buy. These two developments suggest that Ezion is aiming to have a greater ownership of its assets. We see this as a positive sign and suggest that it is confident of the payback of its assets and the potential contracts that it could secure with these assets. We maintain BUY on Ezion with a TP of SGD2.50, based on 11x FY14E P/E.  

Source: Maybank Kim Eng Research - 3 Jan 2014