DBS Equity Research: Wired Daily 19 May 2015

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Publish date: Tue, 19 May 2015, 02:22 PM

Ezion - Officially refutes allegations by partner AMS. Maintain BUY; TP of S$1.50.

Ezion has disputed allegations by its partner Atlantic Marine Services BV (AMS). AMS is on the verge of losing its rig operating and maintenance contracts on three service rigs chartered to an undisclosed European IOC, which Bloomberg reported to be Maersk Oil (Maersk). AMS has accused Ezion for misinforming Maersk that it is in financial distress, inducing Maersk to breach the agreement with AMS, and inflated charter rates for higher loan values. Ezion has refuted these allegations. Ezion provides bareboat charters while AMS offers operating and maintenance services on these service rigs. AMS has proceeded to seek injunction to halt discussions between Ezion and Maersk, in a move to seemingly prevent the loss of AMS's service contract to Ezion. Ezion's potential signing of "new" contract with Maersk would be the near-term re-rating catalyst. Cancellation of rig charter is less of a concern as Maersk is in need of the service rigs to support its production activities and finding a replacement may not be an easy task at the North Sea region. Maintain BUY; TP of S$1.50.

Silverlake Axisreported 3Q15 net profit of RM76.6m (+22% y-o-y, +7% q-o-q), c.5% above our expectations due to GST related projects in Malaysia. Digital banking rollout to benefit, while potential listing of Chinese associate is a nearterm catalyst. Maintain HOLD with revised TP of S$1.33 (Prev S$ 1.25).

Mermaid Maritimerecords bigger-than-expected loss of US$16m in 1Q15 as key DSVs are drydocked for long periods. We cut FY15/16 earnings to take into account the weak results as well as potentially low day rates. Significant contract wins or M&A activities could provide catalysts for the stock. For now, maintain HOLD call with lower TP of S$0.23 (Prev S$ 0.27).

Centurion has won a tender to operate a student hostel in Singapore for 8 years. The 400-bed dormitory, located at Short Street, is already in operation, and Centurion will refurbish the property and commence operations in 2H15.

While this business will have marginal impact on earnings, we understand that this will be a platform from which Centurion will explore and gain experience in operating a student hostel particularly in an Asia/ASEAN context, and could potentially lead them to launch more initiatives in the region. This will help the Group to diversify its business exposure within the student accommodation business. As it stands, Centurion owns dormitories in the UK and Australia, which are already fairly mature markets for student accommodation. We maintain our BUY call, with no change to our TP of S$0.85.

Midashas won RMB328.9m worth of high speed train car body components contracts for delivery in 2015. These contracts can be broken down into 1) RMB185.4m worth of contracts awarded by CNR Changchun and RMB143.5m worth of orders by CNR Tangshan, and are specifically for the supply of aluminium alloy extrusion profiles and fabricated parts for high speed trains. These are positive and significant for the company for 2 key reasons 1) it boosts end of 1Q15 order book of RMB1.04bn to nearly RMB1.4bn, and provides confidence of earnings recovery in 2015 and 2) re-assures investors that Midas can continue to win substantial contracts even from a soon-to-be-merged China Railway entity. Maintain BUY, TP S$0.49 (0.9x P/B).

GSS Energy has entered into an investment agreement with Ramba Energy. GSS Energy is to provide a US$5m investment in Ramba Energy's drilling operations at West Jambi block in Sumatra, Indonesia. This represents an expansion of the GSS's existing operations in Central & East Java to gain direct access into oil and gas concession in a new geographical location.

Non-oil domestic exports failed to maintain their momentum of March, with year-on-year growth in April slumping back to a modest 2.2%. The market was looking at a 5% drop. Last month's growth in the NODX, which came after an 18.5% surge in March, was largely propped up by exceptional strong shipments of non-regular items such as structures of ships and boats and non-electric engines and motors. The electronic NODX fell 3.8% y-o-y in April, in contrast to a 10.4% increase in the previous month, dragged down by declines in shipments of integrated circuits, parts of PCs and consumer electronics. Shipments to South Korea and EU were the two top contributors to NODX's growth last month. But NODX to key markets China, the US, Malaysia and Japan fell. Month on month, the NODX tumbled by a seasonally adjusted 8.7%, after a 23.1% jump in March. The market had expected worst - a 14.8% drop.

Source: DBS

Ezion (5ME)Silverlake Axis (5CP)Mermaid Maritime (DU4)Centurion (OU8)Midas (5EN)GSS Energy (41F)Eneco Energy (R14)

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