Ezion Holdings

[winston]

not vested

A service rig is not a liftboat

■ We initiate coverage of Ezion with an UNDERPERFORM rating and a target price of S$1.80. While Ezion has typically been seen as a play on the underpenetrated liftboat market, we believe the market is under-estimating the risks of a shift in its portfolio towards service rigs.

■ A service rig is not a liftboat. Service rigs are old jackups converted into other uses including accommodation, or that continue to be used as drilling rigs. With an acceleration in contract awards since 2012, Ezion’s fleet of 12 service rigs in operation exceeded its fleet of five liftboats in January 2014.

Based on our estimates, the average age of Ezion’s service rigs is 33 years, the second oldest globally. As the global jackup fleet is expected to grow by 30% with a surge in newbuild deliveries, we expect the rig replacement cycle to drive downside pressure on dayrates and utilisation rates of older assets.

■ Greater competition expected in liftboat market. We believe Ezion’s strength lies in the liftboat market, where our proprietary liftboat model indicates a potential for the fleet in Asia Pacific to grow by close to 80 units.

However, we expect significant new competition to emerge due to the low barriers to entry, and our channel checks indicate that both global liftboat operators and local players are expanding their fleet in the region.

■ Valuation at premium to peers. Our target price of S$1.80 is derived from a SOTP valuing Ezion’s service rigs using a DCF with a useful life of five years.

While Ezion’s P/E is at a discount to peers, we believe this is justified as close to 40% of its 2015 earnings are from service rigs that will not be recurring beyond 2018.

On 2015 EV/EBITDA of 7.1x, Ezion is trading at a premium to the sector average of 6.5x despite its fleet of older assets.

Source: CS

[behappyalways]

Idle liftboats impact Ezion’s profitability prospects
http://sbr.com.sg/shipping-marine/news/ ... -prospects

[behappyalways]

Not vested

Battered Ezion turns to buybacks after steep share price crash
http://sbr.com.sg/energy-offshore/news/ ... rice-crash

[behappyalways]

Capex cuts, liftboat oversupply threaten to sink Ezion in 2016
http://sbr.com.sg/energy-offshore/news/ ... on-in-2016

[winston]

not vested

2Q hit by underperformance of associate/JV

Maintain BUY on Ezion with a TP of S$0.58, based on 0.6x FY16 P/BV.

Ezion’s share price has been dragged down by the rights issue and weak sentiment following Swiber’s incident.

While Ezion’s net gearing ratio of c.1x (post rights) may appear high, Ezion is among the stronger players with good assets,
positive operating cash flow and decent cash balances.

Re-rating catalysts stem from earnings recovery with the resumption of service rigs currently under repair/upgrades in 2H16, delivery of newbuild liftboats, and successful diversification of its customer base to win new charter contracts.

Valuation:

We value Ezion based on 0.6x FY16 P/BV, arriving at a target price of S$0.58. This implies 101% upside potential.

Key Risks to Our View:

Rate reduction and contract terminations

We estimate that every 1% decline in average day rates will reduce Ezion’s bottom line by 5%. We have prudently assumed that rates will reduce by 15% p.a. in FY16-17

Five service rigs are due for charter renewals in FY16. Besides, the Mexican contracts appear to be at risk of termination as these consist of the few units that are deployed for drilling and there have been several cancellations in that region.

Competition may be keener ahead with more new entrants attracted to the growing liftboat market.

Source: DBS

https://researchwise.dbsvresearch.com/R ... E=cbjjhk-b

[winston]

Ezion turns to wind to power growth

By Benjamin Cher

SINGAPORE (Sept 30): UOB Kay Hian on Friday maintained its “hold” call on Ezion Holdings, and raised its target price to 30 cents from 23 cents previously.

Ezion’s earnings appear to have bottomed out in 2Q16, notes UOB lead analyst Foo Zhi Wei.

“Management has been nimble with its strategy, venturing into the wind farm industry to mitigate the downturn,” says Foo.

According to Foo, sources have confirmed the deployment of Ezion’s Atlantic Amsterdam (Unit #8) for a 16-month contract for DONG Energy UK in the North Sea. The rig has been on-site and in operation since Aug 27 for an offshore windfarm installation project.

Foo is optimistic for a 3Q16 quarter-on-quarter earnings boost, as the deployment of Unit #8 a month earlier than expected will contribute a full month of earnings.

Barring any surprise expenses and the working status of the 17 units, Foo expects a quarter-on-quarter earnings improvement.

“As earnings gradually decouple from the oil and gas industry, we expect a valuation re-rating at some point,” he adds.

Ezion’s 2016 core earnings projections are now raised 1% from US$52 million ($71 million) to US$53 million, mainly due to timing differences in revenue recognition. According to Foo, forecasts for 2017 to 2018 earnings remain unchanged.

Shares for Ezion closed 1 cent lower at 28 cents.

Source: The Edge

http://smr.theedgemarkets.com/article/e ... 5-87358173

[winston]

not vested

Ezion Holdings [EZI SP, TP S$0.58]

Ezion provides liftboats/service rigs and offshore logistics support services to the offshore oil & gas industry. It was one of the
first companies to introduce liftboats in Asia and the Middle East. As of June 2016, it has a total of 26 service rigs delivered and
17 service rigs in operation.

Despite the weak oil & gas market, we believe Ezion remains an attractive investment as its liftboat/service rig assets support
the more resilient production stage of the offshore E&P value chain, and these assets offer an attractive substitute to the traditional workboat/barge combination used to support production platform maintenance.

In terms of the business outlook, vessel deliveries of 2/7/2 units in 2016/2017/2018 respectively – all which have secured
back-to-back contracts – are expected to contribute to the bottomline. Additionally, an MOU inked with one of China’s top
IPPs – Huadian – to support Chinese offshore windfarm installations holds potential.

Rate reductions and contract terminations remain a key risk for Ezion; we have prudently assumed a 15% p.a. reduction in
our model.

Ezion’s share price, currently trading at 0.4x P/BV, has been dragged down by its recent rights issue, as well as weak sentiment
in the wake of the Swiber incident in Singapore, but we believe this is unjustified.

We have a BUY call on Ezion with a TP of S$0.58, based on 0.6x FY16 P/BV.

Source: DBS

[winston]

not vested

TERMS OF REPS AMENDED

- Two key amendments in terms
- Positive for both funds and Ezion
- Slight recovery in sentiment

Ezion Holdings has entered into a supplemental agreement with the holders of its redeemable exchangeable preference shares (REPS), and its wholly owned subsidiary, Teras Investments Pte Ltd to amend the terms of the REPS:
1) the maturity of the REPS shall be extended by three years, from 10 Oct 2016 to 10 Oct 2019, and
2) no annual dividend in respect of the outstanding REPS as at the maturity date shall accrue and be payable for the period 11 Oct 2016 to the maturity date.

This is a positive for Ezion, and is more positive than negative for the REPS holders.

Meanwhile, with the recovery in sector valuations due to a stronger oil price, we increase our P/B valuation from 0.35 to 0.4x, such that our fair value estimate rises from S$0.30 to S$0.35. Maintain HOLD.

Source: OCBC

[winston]

not vested

Ezion Holdings: Monitoring PEMEX

With regards to the three drilling rigs under the Ezion-Swissco JV, Strategic Offshore, there have been concerns about the charterer’s ability (end client is PEMEX) to pay on time since the oil price plunge.

Ezion had also previously highlighted that the group has been experiencing difficulties obtaining payments from clients, and it was also reported in the media that PEMEX has been dragging its feet on payments to contractors and suppliers.

As a result, there is a risk that provisions on receivables and the JV (NAV: US$107.9m as at Dec ‘15) could be incurred in the coming quarters, but we also note that PEMEX earlier this month has successfully placed some US$3.95b in bonds to help address its financial needs for 2017; the offering was 2.2x oversubscribed.

In Sep, PEMEX also completed a US$1.1b sale of its stake in a pipeline operator, following which we could see more asset sales.

Maintain HOLD with S$0.35 fair value estimate on Ezion.

Source: OCBC

[winston]

not vested

Ezion Holdings - Focusing on Balance Sheet Preservation (BUY, TP SGD0.42, EZI SP, Oil & Gas)

3Q16 net profit of USD9.4m (-69% YoY, +15% QoQ) was in line.

9M16 adjusted net profit made up 72%/80% of our/consensus FY16E.

Still, we cut FY16/17/18E net profits by 29/31/29% to adjust for
1) the USD11.7m associate impairment in FY16E which came post its 2Q16 results and
2) more delays and contributions from additional units in FY17-18E following management’s guidance on a challenging outlook.

Consequently, our TP dips from SGD0.45 to SGD0.42 but remains pegged to 0.5x P/BV. Maintain BUY.

Source: Kim Eng