1Q14 results in line, with PATMI of USD45.2m (-2.0% YoY, +11.7% QoQ). Stripping out the one-off disposal gain in 1Q13, PATMI grew 62% YoY.

Secured USD63.9m, five-year service rig contract to support oil major in the Middle East.

Maintain BUY and TP of SGD2.70, pegged to 13x FY14E P/E.

What’s New

Ezion’s 1Q14 results were within expectations, with PATMI of USD45.2m (-2.0% YoY, +11.7% QoQ) making up 20% of our and consensus full-year forecasts. We expect the subsequent quarters to post stronger performance as more liftboats start to contribute. Excluding the USD18m gain from the sale of Offshore Marine Services Alliance in 1Q13, PATMI increased by 62% YoY. We estimate that 19 liftboat units contributed in 1Q14 (4Q13: 17, 1Q13: 10).

What’s Our View

Four liftboat projects, Units 9, 18, 24 and 27, are expected to be delayed. But Units 9 and 24 could end up with higher charter rates, which would compensate for the revenue loss from the delay. We therefore do not see the need to adjust our forecasts as yet.

Ezion also secured a five-year, USD63.9m service rig contract to support an oil major in the Middle East with effect from year-end. This contract is based on a different business model, requiring the asset to be chartered in at USD22.5k/day and subsequently leased out to the client. Ezion will incur USD10m for the upgrading of the asset but this would be 100% financed by a bank loan. Ezion does not need to utilise any cash and we estimate annual pretax profit of USD2.1m for this project. Separately, Ezion also bought back the 51% stake in Unit 1 for USD25m, which was sold to Ezra 3-4 years ago. The motivation to own more assets demonstrates its confidence in the growing liftboat business.

We remain optimistic on Ezion’s liftboat business and expect robust growth to continue. Maintain BUY and TP of SGD2.70, pegged to an unchanged 13x FY14E P/E.

Source: Maybank Kim Eng Research - 8 May 2014