• Healthy 1Q14 results
• Branches into a different business model
• Higher FV of S$2.70

1Q14 results within expectations

Ezion Holdings reported a 72.3% YoY rise in revenue to S$94.4m but saw a 2.0% decrease in net profit to S$22m in 1Q14, such that the latter met 22% and 20% of ours and the street’s full year estimates, respectively. There were delays in four projects (units 9, 18, 24 and 27) which pushed back revenue contributions by three to six months, but had a smaller than proportionate impact on our forecasts with our buffer for certain projects. On a positive note, Liftboat Nora (Unit 24) is likely to secure a 50% higher charter rate due to the change in area in which it will be deployed.

Announces project with another business model

Ezion also announced that it has secured a charter contract worth US$63.9m over a fiveyear period to provide a service rig for an oil major in the Middle East. The unit is expected to start working in Dec this year. The business model that Ezion is pursuing in this project is different from what it has normally been doing, and no capital outlay is required (details on the following page). Taking full ownership of liftboat 1 Recall that Ezion entered into a partial divestment of its first liftboat when it was a relatively cash strapped company initially, selling 51% of Teras Conquest 1 Pte Ltd (entity which holds the liftboat) for US$14.79m in 2010. Ezion will now buy back the 51% stake for US$25m, taking full ownership of the asset which is currently working in Nigeria till early 2015.

Maintain BUY; higher FV of S$2.70

We tweak our estimates to incorporate the changes in Ezion’s projects, trimming our net profit forecast for FY14F by about 4% but bumping up our FY15F earnings estimate by about 1.4%. At the same time, we roll forward our valuation to blended FY14/15F core earnings with an unchanged P/E of 12x, raising our fair value estimate from S$2.41 to S$2.70. Maintain BUY.

Source: OCBC Research - 8 May 2014