Towards Financial Freedom
Ezra - Divests Entire Ezion Stake For USD71m
Ezra has sold down the remaining 40m shares it holds in Ezion Holdings for gross proceeds totaling SGD90m, from which it realised a net gain of USD65.7m. We believe the cash will come in handy to pare down its debts and meet its working capital needs. While the share sale will boost the company's balance sheet, we prefer to see operating improvements from Ezra before turning positive on the stock. MaintainNeutral.
- Sells down remaining stake in Ezion. Ezra announced that it has sold down its remaining stake comprising 40m shares in Ezion Holdings (EZI SP, BUY, TP: SGD3.00) at SGD2.25 per share, representing a 4.9% discount to yesterday's volume weighted average price (VWAP) of SGD2.37/share. The gross value of the shares sold, comprising 4.17% of Ezion's share base, is about SGD90m (USD71.2m).
- Injection of USD71m cash proceeds to boost financial agility. Ezra will realise a net gain of around USD65.7m from the sale in 3QFY13. We believe the cash will come in handy for the company to fund its global expansion and working capital needs. A weak balance sheet may deter the company from bidding for large-scale EPCC projects. We estimate that the share sale will boost our FY13F net gearing estimate from 0.98x to 0.90x.
- Raising FY13-14F core EPS by 2%-3%. We expect the company to utilize part of the proceeds to repay its debts, which will reduce its
interest payments. We also raise the one-off gain in our model from USD30m to USD65.7m to reflect the gain from the latest share sale. We are now projecting a FY13 headline net profit of USD84.8m. - Maintain Neutral, with SGD1.15 TP. Our TP is based on a 0.85x FY13F P/B. While the company's longer term outlook appears positive, we remain lukewarm on Ezra, whose fleet utilisation is likely to remain unsatisfactory due to cabotage regulations in certain countries, delays in project awards and intense competition from new players.
Source: OSK
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