Towards Financial Freedom
Ezion - USD49.1m Service Rig Charter In Middle East
Yesterday, Ezion (EZI) announced a USD49.1m contract to provide a service rig to an oil major in the Middle East for four years. This is the eighth service rig contract for 2013, bringing the YTD new charters to USD551m. The service rig is expected to be deployed in mid-2014. We estimate this job to add 0.6% to 1.2% to our existing FY14-15 EPS estimates. Our earnings are unchanged. Maintain BUY and SGD3.26 TP.
- USD40m total project cost. The non-self-propelled service rig will be owned by a 50:50 JV with Kim Seng Holdings. The JV, which will acquire a used rig from a leading rig owner at USD22m, plans to spend an additional USD18m for upgrade and refurbishment. Funding will be via USD28m debt and USD12m equity. Besides this contract, EZI could provide another self-propelled unit to the same client in the future.
- Earnings contribution to kick in from mid-2014. Based on the estimated annual revenue of USD12.3m, a 10-year depreciation profile and 6% effective interest rate on the debt, the JV is estimated to achieve USD6.6m in net profit per annum. The service rig is expected to be deployed in mid-2014. We estimate the charter contract to add USD1.4m/USD3.3m to EZI's FY14/FY15 net profit, equivalent to 0.6-1.2% of our current estimates.
- Valuation: Maintain BUY, with TP of SGD3.26. Our TP is based on a 16x P/E on a FY13/14 fully diluted EPS. The stock is now trading at a 13.3x FY13F P/E and 7.5x FY14F P/E. EZI remains our top sector pick.
Source: OSK
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
