Ezion Holdings Limited announced that it has entered into a subscription agreement with JK Tech Holdings for the purchase of 42m ordinary shares in the capital of JK Tech at an issue price of S$0.09/share (40% discount to its last closing price), which implies a total investment cost of S$3.78m. This would be financed by the issuance of 1.85m new Ezion shares at an issue price of S$2.0445 (4.5% discount to its last closing price). Ezion has also entered into an option agreement with JK Tech for 260m share options, with each option carrying the right to subscribe to one new ordinary share in the capital of JK Tech at an exercise price of S$0.09/option. Ezion intends to introduce opportunities in the business of exploration, exploitation and production of oil and gas to JK Tech, which wishes to diversify into this segment. Hence, this is viewed as a longterm strategic investment and partnership by Ezion. The new Ezion shares to be issued represent only ~0.15% of its total enlarged issue share capital; and on a pro forma basis, this development would only marginally raise its FY13 NTA/share and EPS by 0.2% and 0.1%, respectively. Hence, we maintain our BUY rating and S$2.57 fair value estimate on Ezion for now.

Source: OCBC Research - 7 Apr 2014