Ezion Holdings reported an 8.9% YoY fall in revenue to US$82.1m and a 62.2% drop in net profit to US$15.5m in 1Q16, accounting for 25% and 20% of our full year estimates, respectively. Core net profit represented 22% of our full year figure, and results were within expectations.

Net gearing remained at 1.1x, same as the previous quarter, and the group generated operating cash flows of US$30.9m in 1Q16; we note that Ezion has been generating positive operating cash flows each year (US$91m in FY12, US$155m in FY13, US$214m in FY14, US$209m in FY15), which is a credible performance compared to others in the industry.

Still, the operating environment is expected to remain difficult in view of the depressed state of the sector. Pending an analyst briefing later this morning, we maintain our HOLD rating but put our fair value estimate of S$0.56 under review.

Source: OCBC Research - 12 May 2016