DBS Equity Research: Wired Daily 7 July 2015

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DBS Equity Research: Wired Daily 7 July 2015

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Publish date: Tue, 07 Jul 2015, 03:16 PM

STI - Muted reaction to Grexit uncertainty, July rebound towards 3425 intact

Ezion - Acquiring 30% in a marine engineering solution provider for S$18m. Maintain BUY and TP of S$1.50

The benchmark STI ended off the session lows to fall a relatively tame 10pts despite heighted developments of a

'Grexit'. Yesterday's low was also some 40pts above last Monday's low when financial markets first reaction to news about the Greece referendum. The reaction is certainly more muted compared to a week ago. STI held firm at slightly above the 3300 support. We keep our view for 3300 support and a July rebound towards 3425.

US stocks fell but ended off session lows as investors weighed developments in Greece. Energy stocks led declines as oil price tumbled. The onus is on Greece to act quickly to avoid a meltdown of its banks. German Chancellor Angela Merkel and French President Francois Hollande are due to meet other euro-region leaders today. Greek Finance Minister Yanis Varoufakis has resigned. According to Bloomberg, Varoufakis said there was "a certain preference" among European creditors that he no longer be involved in negotiations. Oil price fell with WTI falling more than 7% amid concerns about an oversupplied oil market. The outcome of the negotiations to the Iran nuclear deal that can eventually open up the doors for Iranian oil to be supplied to world markets is due today.

Ezion has proposed to acquire 30% stake in Rotating Offshore Solutions Pte Ltd (ROS), a Singapore-based marine engineering solution provider specialized in the O&G production related segment. Key products for ROS comprise the FPSO topside equipment modules such as Oil Separation/Stabilization Modules, Fuel Gas Compression Modules, Gas Lift and Injection Compression Modules. Ezion will subscribe 321,429 shares in ROS for an aggregate consideration of S$18m. This represents a 1.2x NTA and 6.9x FY15 PE (FYE Mar), a tad higher than Ezion's <1x NTA and 6.0x FY14 PE (FYE Dec). In return, Ezion will issue ROS 17.5m new shares in Ezion @ S$1.0287. ROS's existing business is complementary to Ezion's. It will create synergies to better support Ezion's customers on their production support related activities in the offshore O&G industry. It will also place the two entities in a stronger position to compete with competitors and explore new growth opportunities. Maintain BUY on Ezion and TP of S$1.50 (8x FY15 PE). The financial impact is immaterial.

iFAST Corporation has entered into a subscription agreement with Crouzet Limited, whereby Crouzet shall subscribe for 694,400 new shares at the issue price of S$1.44 per subscription share. Crouzet is a third party nominee company that is a settlement agent for the Group in relation to certain trailer fees which is payable by the Group to certain financial advisory companies, and the team managers and individual advisors of such financial advisory companies. This is part of the Group's initiative to build loyalty with its business partners.

mDRis poised to acquire a Japan-based company engaged primarily in the business of developing and providing mobile content. The expected consideration is between S$110m and S$16m, to be made in cash, shares and convertible debt. The vendors will own (a) between 35 and 40% of mDR's postcompletion enlarged issued capital; (b) and between 45 and 50% of the enlarged capital upon conversion of the full amount of the convertible debt.

SBI Offshore has formed a 51:49 joint-venture with Germany-based Gräss Group to build and operate solar farms and systems in a major diversification into renewable energy. Gräss Group has over 15-year track record in engineering, construction and development of solar energy projects and has successfully completed approximately 2,000 megawatts (MW) of PV projects.

TRIYARDS Holdings has gained further traction with its larger liftboat offering through its latest order wins of US$175m (which excludes owner furnished equipment), with visibility into the financial year ending 31 August 2017 (FY17). The Group also reports 3QFY15 net profit of US$5.4m and generates US$33.1m in operating cashflow. Net gearing strengthens to 0.3x.

EMAS Offshore has secured three new awards for charters with oil majors in West Africa and Thailand valued at more than US$24m (including options). The average contract duration for the contracts is approximately 1.1 years and the charters are expected to commence in Q4 FY2015.

First Ship Lease Trust announces new time charter contracts for three tankers. The time charter agreements are expected to commence during the second half of this year and are anticipated to generate up to US$61m in revenue for the Trust over the next three years.

Source: DBS

STI ETF (ES3)Ezion (5ME)IFAST (AIY)SBI Offshore (5PL)Triyards (RC5)FSL Trust (D8DU)

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