Last week, Ezion announced that it has received endorsements to develop a marine supply base to support the offshore oil & gas scene in Australia. This is a critical factor which had been delaying the awardof LNG-related contracts, and with the marine base starting operationsby September this year, contracts should start flowing again. We thinkthe recent 25% correction is overdone, presenting an extremely attractive entry point.

Lack of staging ground for offshore projects now resolved. We understand that the lack of a staging ground was a critical reason for the LNG project delays. The offshore projects required clear land, warehousing facilities, space for welding / painting / other jobs, and a deepwater jetty. Ezion's marine base will remedy this lack, and set the stage for these projects to proceed.

Ezion marine base supports four major offshore projects. The marine base will support the super-massive USD34b Ichthys LNG project, Shell's FLNG Prelude project, and the Bonaparte LNG and Montana projects.

Expecting order flow-through. AusGroup now has a record AUD4.5bn tender book, dwarfing the AUD0.6bn of tenders at Dec-12. The build-up of the tender book was due to the delays of the contract awards, and we expect AusGroup to convert about 20% of its tenders into firm contracts, providing good-margin work for 2H13 through FY15F. Further, this week Upstream noted that Ensco has been awarded the final Ichthys drilling contract.

25% correction overdone; extremely compelling valuations. AusGroup's shares have come off 25% since its recent peak, and now trades at 6.9x FY13F EPS, 1.1x P/B, with an EV/EBITDA under 3.0x (based on current price of SGD0.50). These are extremely compelling valuations for a company growing at 20% EPS CAGR to FY15F, ROE consistently above 15%, and a strong net cash position of SGD0.054 per share. We believe that the reaction to the poor 2Q13 results (which included one-off expenses and variation orders) is severely overdone, and this is the time to enter. Our TP of SGD0.73 is based on 9x blended FY13F/FY14F EPS. BUY.

Ezion's marine supply base is located on Melville Island which is located just offshore directly north of Darwin in the Northern Territories. On the map below, it is situated between "Darwin" and "Ichthys LNG".

Source: OSK