Ezion: BUY S$0.64; Bloomberg: EZI SP
Lifting up to expectations;
Price Target : S$ 0.86
At a Glance
· Stellar 2Q10 results were within our expectation
· Signed LOI worth AUD70m for marine logistics work
· Near term catalysts include more contract wins and further updates on
its liftboats
Comment on Results
Robust operating profits boosted by disposal gains. Ezion posted another
quarter of strong growth in 2Q10. Recurring net profit surged 103% yoy and
20% qoq to S$9.2m on revenue of S$32.9m (+55% yoy, +29% qoq), attributable
to a larger vessel fleet. The sequential improvement, we believe, came
largely from the progressive deployment of vessels to the Gorgon project,
with all 8 deployed by mid-2010 (from 4-5 vessels in 1Q). In addition,
Ezion made a disposal gain of S$7.5m from the divestment of a 51% stake in
a subsidiary that owned the Group's first multi-purpose self-propelled jack
up, which lifted its net profit to S$16.5m (+305% yoy, +114% qoq). EBIT
margin held up well at c. 26%.
Signed LOI worth AUD70m. Together with the results, Ezion announced that
its Australian operation has received a letter of intent (LOI) for marine
logistics work from a Multi-National Oil Major with an estimated contract
value of AUD 70m. The work is expected to be carried out over four years
from 2011 to 2014.
Recommendation
Expect sequential improvement. While 1H10 has accounted for only around 39%
of our FY10F, we are keeping our forecasts unchanged. We expect the group
to post sequentially stronger quarterly results with the delivery and
charter of its third and fourth liftboats in 3Q10 and 4Q10.
Maintain BUY, TP unchanged at S$0.86. TP is pegged to 12x blended FY10/11
EPS. We believe further near term catalysts could include more contract
wins and further updates on its liftboats. Ezion could potentially invest
in another 2 liftboats using cash proceeds raised from liftboat divestments
in 1H10.
By: Jeremy Thia (DBS Vickers)
