Ezion Holdings reported 2.8% YoY decline in revenue to US$90.0m and a 36.3% drop in net profit to US$29.0m in 2Q15, such that 1H15 net profit accounted for 37% and 34% of ours and the street’s full year estimates, respectively. Results were below expectations; gross profit margin was 35% vs. 51% a year ago, and 46% in 1Q15.

Revenue was lower than expected due to the absence of contribution from the marine and offshore logistics support services segment as projects in Queensland, Australia did not go into additional trains as originally expected. The group also inter-changed a few of its service rigs among its existing clients.

Though management believes this is necessary for better deployment of assets over the longer term, gaps of idle units may be created in the interim. Modification and repair work also led to extra costs and delay in deployment of units. Pending an analyst briefing later, we put our Buy rating and fair value estimate of S$1.55 under review.

Source: OCBC Research - 14 Aug 2015