• FY13 core PATMI up 115%
• Expect more assets to be deployed
• Forecasting FY13-15F core earnings CAGR of 31.5%

FY13 core earnings in line with our expectations

Ezion Holdings reported a 60.0% YoY rise in 4Q13 revenue to US$83.7m and a 97.3% increase in PATMI to US$40.5m. For FY13, revenue rose 77.7% to US$281.9m, forming 95.4% of our FY13 forecast, while PATMI surged 103.4% to US$160.4m. If we exclude its gains on disposal items, we estimate that core PATMI jumped 115.0% to US$140.7m. This met our expectations, coming in 2.1% above our projection.

Outlook still robust

Ezion’s operational improvement was driven by the deployment of additional units of its service rigs and contribution from three LNG projects in Australia for its Offshore Logistic Support Services segment. The latter also saw an improvement in operating profit margins as Ezion deployed more of its own assets instead of utilising third-party assets. Looking ahead, we remain positive on the demand for service rigs, and expect Ezion to deploy more assets in FY14. A glitch though, came from two project delays, one of which was for a project in the Caspian Sea (bad weather), and the other due to customer requirements for additional upgrading features.

Net gearing spiked up, but still manageable

Ezion’s net gearing spiked up from 0.76x (as at 31 Dec 2012) to 1.15x, as at end FY13. However, we are not overly concerned, as its interest coverage was 11.3x in FY13, while the servicing of debt will be partly supported by income from its long-term charter contracts. Management maintained that it would still be comfortable with a net gearing ratio of 1.3x.

Maintain BUY

We keep our FY14 forecasts largely intact and introduce our FY15 projections. We expect Ezion to continue its growth trajectory, and forecast robust core earnings CAGR of 31.5% from FY13-15F. Maintain BUY and fair value estimate of S$2.57, pegged to 12x FY14F core EPS.

Source: OCBC Research - 21 Feb 2014