Ezion Holdings announced last Friday evening that it expects to record a net loss for 4Q16 and FY16, as there will be impairments on its assets. This is not a surprise to us as we are already forecasting a US$15m net loss for FY16, after US$33m of net profit in 9M16.

As mentioned in our last report, we had expected the group to report impairments in its upcoming results from the cancellation of certain past committed projects that no longer make economic sense, as deposits paid to yards and suppliers have to be written off. There could also be an impact on receivables. However the stock’s current low valuation (0.4x book) has largely priced in the negatives.

Maintain BUY with S$0.54 fair value estimate, based on 0.55x FY17F book.

Source: OCBC Research - 20 Feb 2017