Ezra Holdings reported a 27% rise in revenue to US$402.1m and a 16% increase in net profit to US$8.3m in 3QFY14, such that 9MFY14 net profit of US$34.2m accounted for 77% of our full year estimate. However, stripping out a one-off gain of US$16.6m in 2QFY14, 9MFY14 core net profit of US$18m only met 52% of our full year estimate. Gross profit margin improved from 1% in 3QFY13 to 16% in 3QFY14 (similar to 2QFY14’s 16% as well) as there were no surprises in the subsea division (which impacted earnings in 3QFY13).

Currently the group’s order book stands at US$2b, and management is cautiously optimistic that its core operating performance in FY14 will be better than that in FY13. Pending a conference call later, we maintain our HOLD rating but put our fair value estimate of S$1.05 under review.

Source: OCBC Research - 11 Jul 2014