Strong FY12 earnings growth attributed to commencement of new charters. FY12 net profit  of  USD78.8m  (+36%  y-o-y)  was  above  our  full-year  expectation  of  USD74m  as depreciation  and  interest  expenses  were  lower  than  our  forecast  and  higher  third  party vessel  charter-in  in  Australia.  4QFY12  revenue  jumped  +92%  y-o-y  to  USD52.3m,  in-line with  expectation,  and  lifted  full-year  FY12  revenue  to  USD158.7m  (+48%  y-o-y).  The growth  was  primarily  driven  by  the  service  rigs  unit,  which  reported  revenue  growth  of +119% to USD92m and accounted for 58% of total FY12 revenue (from 39% in FY11).

Another year of aggressive capex but the projects are backed by contracts. Ezion is now operating a fleet of nine liftboats and service rigs globally with another 13 units to be delivered  in  2013-15.  Ezion  ended  4QFY12  with  a  net  gearing  of  0.76x  but  we  estimate this to increase to 1.1x by end 2013 due to another year of heavy capex spending. Ezion may need to issue more perpetual securities if contract flows are as strong as last year.

Earnings: +37% EPS CAGR over FY12-15F. We trim FY13F EPS by -5.4% to account for additional drawdown of debt to fund the latest  jackup project for a South Asia national oil company, and delay in three projects under refurbishment. We raise FY14F EPS by +8.2% to reflect contribution from the latest jackup project and introduce our FY15F EPS. We are now projecting FY13-15F EPS growth of 47%/52%/15% respectively.

Valuation: Raise TP from SGD2.16 to SGD2.55. We upgrade Ezion's TP from SGD2.16 to SGD2.55 as we pegged the valuation to a higher target P/E of 16x (from 13x) on FY13F EPS. Our new valuation is close to our DCF-derived valuation of SGD2.52/share (report on 23 Jan 2013) whereby we assume ten additional contracts to provide liftboats and service rigs on top of the existing charter contracts. Maintain BUY.

Source: OSK