Ezra 1 (May 08 - Dec 09)

[winston]

EZRA HOLDINGS - JPMorgan upgraded Ezra Holdings, an offshore and marine service provider, to "neutral" from "underweight" after the firm said its second-quarter profit rose 21 percent compared to last year on higher revenue. [ID:nSN4801261].

But Citi cut its earning forecast for the firm in 2009 by 10 percent and kept a "sell" rating for the stock.

[winston]

From DMG:-

Ezra Holdings: Tepid 2Q performance (NEUTRAL\S$0.795\Target S$0.720)
Serene Lim (62323897, [email protected])

2QFY09 results within expectations. Ezra Holdings (Ezra) released its 2QFY09 results yesterday. Topline increased by 30% YoY but fell 44% QoQ to US$63m. This was largely due to the decline in contribution from Energy Services (from US$39.9m in 1QFY09 to US$6.4m in 2QFY09) as the previous contract with STP Energy had been completed. The breakdown of revenue was Offshore Support Services (US$43.9m), Marine Services (US$12.7m), and Energy Services (US$6.4m). Core operating profit, excluding forex gain, was US$16.1m, an improvement of 58% YoY and QoQ. Going forward, we expect revenue and operating profit to mirror this quarter’s results.

Need to keep an eye on the receivables. Ezra’s collection period gapped up to 271 days on an annualised basis for 1H09 as compared to 127 days in FY08. Management said this was largely due to the revenue mix which resulted in different receivables’ collection periods. In our view, as Ezra moves to managing new or longer gestation projects, it would be important to keep a tight control. As a result, Ezra’s cash conversion cycle increased from 100 days as at end FY08 to 130 days as at 1H09.

Anchored three AHTS chartering contracts. In addition, Ezra announced new and renewal contracts of three AHTS with charter periods of up to two years valued at US$47m. Our back-ofthe-envelope calculations suggested that the chartering rate was at an average of US$2.22 per bhp/day. This rate is slightly higher than the guided US$2 per bhp/day, suggesting that there is still demand for Ezra’s higher capacity AHTS.

Maintain Neutral. We are leaving our FY09 and FY10 estimates intact for now. Given Ezra’s exposure to contingent liabilities arising from sale-and-leaseback financing and a fleet comprising of high capacity vessels, we opine Ezra’s greatest risk is a reduction in chartering rates.

Our target price is revised up to S$0.72 (from S$0.45 previously) based on revisions to our SOTP valuation. As Ezra share price has risen 61% in the past month, and given that our assumptions remain intact, we do not find further upsides from current levels justifiable by fundamentals.

[winston]

From CIMB:-

Ezra (S$0.80) – 2Q09 results - Bright star in offshore support sector

Ezra's 2Q09 core profit of US$15m was 10% above our estimate mainly due to stronger-than-expected margins from offshore support and lower-than-expected operating expenses. 1H09 core profit of US$24m was 6% above our estimate, forming about 40% of our FY09 forecast and consensus.

We expect a stronger 2H09, mainly driven by EOC’s FPSO maiden earnings. Ezra has also secured contracts worth US$47m for two years for three of its AHTS in South-East Asia at firm day rates. Our earnings estimates are unchanged. Maintain Outperform, with sum-of-the-parts target price raised to S$1.13 from S$0.70, following adjustments to the market value of its listed entities and our target P/E for its offshore support service business.

[winston]

From DBS:-

No surprises
Ezra’s 2Q09 results were in-line with our expectations, with net profit up 21% y-o-y to US$14.9m, on revenue of US$63.0m. Separately, the group also announced new contract wins/extensions for their vessels, at sustained or improved day rates, which continues to showcase Ezra’s competitive strength in this segment. This is in line with our contrarian view that charter rates would remain resilient.

Maintain BUY, TP unchanged at S$1.19.

Results in-line. Ezra’s 2Q09 net profit came in at US$14.9m (+21% y-o-y) on revenue of US$63.0m (+30% y-o-y, -44% q-o-q). Y-o-y revenue growth was primarily due to an expanded vessel fleet, while the large q-o-q revenue decline was due to the completion of a large project in 1Q09, and lumpy recognition of engineering and fabrication jobs.

While gross margins for the respective divisions remain stable, group margins improved over 10ppt q-o-q to 36.7% due to the relatively greater contribution from the higher-margin offshore division. Inline with Ezra’s capex program, net gearing has stepped up to 0.47x from 0.35x as of end 1Q09. No interim dividend was declared.

New contract wins showcase competitive strengths.
Ezra and its associate, EOC, also announced contract wins/extensions for their vessels, at sustained or improved day rates. These awards underscores Ezra’s competitive strength of operating a large, diversified and young fleet of OSVs, with 78% of the current fleet deepwater capable. Demand in this segment continues to remain firm and rates remain relatively resilient.

Maintain BUY, TP of S$1.19 maintained. We keep our earnings forecasts unchanged, as our model has already
captured the impact of these contract wins. Our TP stays at S$1.19, and is based on 8x recurring FY09 PE for Ezra’s core businesses, 6x recurring FY09 PE for EOC and market value for its stake in Ezion Holdings. Maintain BUY.

[winston]

From DBS:-

At a Glance
• Ezra’s future growth to be less capex driven, leverage on existing capabilities and assets
• Still too early to expect contract awards for MFSVs in the near term
• TP raised to S$1.45 based on normalised early cycle valuation metrics

Future revenue growth to be less capex driven. Excluding current committed capex, Ezra plans to leverage on its existing capabilities and assets to secure higher value contracts going forward. The need to be less capex-reliant is made more critical on the back of a tight credit market and uncertain outlook.

Still too early to expect contract awards for MFSVs. In our opinion, it is still too early for investors to expect contract awards for the MFSVs in the near term, given that delivery of the group’s first MFSV is expected in 1HCY2010, and the second, in 2HCY2010. Ezra would typically enter into a contract 3 to 6 months prior to the delivery of the vessel to reduce exposure to potential yard delays.

Introducing FY11 numbers. We have introduced our FY11 numbers, projecting net profit of US$89.0m, which represents a 13% y-o-y increase. This will be driven mainly by full-year contributions from:-
1) the newbuild 12,000 bhp AHTS;
2) the first MFSV; and
3) the 2 chartered-in liftboats.

FY11 will also benefit from the expected commencement of contributions from Ezra’s second MFSV in 2Q11.

Raising Ezra’s TP to S$1.45. Based on normalised early cycle valuation metrics for Ezra, vs. trough valuation previously, we have raised Ezra’s TP to S$1.45. This is based on 10x FY09 PE (prev 8x) for its core businesses, but EOC’s valuation is maintained at 6x FY09 PE due to its high gearing, and market price for its stake in Ezion Holdings. Maintain BUY

[Musicwhiz]

Magic as usual. 6 months ago Citigroup was issuing a TP of 30+ cents, and now DBSV comes up with $1.45. So the firm is worth nearly 5 times more in a span of 6 months ? Simply ridiculous, these analysts !

[winston]

I think we need to compare the direction of the Target Price from the same analyst rather than between analysts.

From DBSV, the Target Price was:-
DBS 1.45 Apr29 from 1.19 Apr9 Mar31 Mar9 from 1.29 Feb12 from 1.25 Dec24 Dec6 08 from 1.17 Nov29 from 1.25 Oct22 from 3.15 Aug20 Jul11 Apr8 Apr2 from 4 Mar5 Jan14 Jan3 Dec5 07 from 8 Oct17 from 7.3 Aug6 from 6.45 May21

( There was a 1: 1 bonus issue on 05/Nov/07 which explains the drop in Target Price from $8 to $4 at that time )

[winston]

Not vested. From BNPP:-

We reduce our earnings estimates as we expect a lower contribution from key associate, EOC.

We believe consensus will eventually raise TPs as we approach FY10.
Target Price ........ SGD1.87............................ (From SGD1.12)

• Ezra is focussed on offering more services, climbing the value chain for offshore support services; a good strategy.
• While EOC’s debt is high, cash flow is strong for the associate; we believe operational hiccups are over.
• We reduce assumptions on EOC’s contribution to Ezra but raise our TP as we rollover to FY10; maintain BUY.

Packing a bigger punch

Sticking to the strategy
Ezra has already established itself as a provider of offshore support through anchor handling and supply tugs (AHTS). Now it plans to climb the offshore service support value chain. This way it should be able to
offer more services to the same client and in turn entrench the relationship with the client.

Next focus is to reap the rewards of integration
While Ezra has taken its foot off the capex pedal, its tactical expansion moves in the past few years should fuel growth in the next two years. It is time now to watch Ezra execute on those plans and reap the benefits
of its strategy.

Better offshore support plus Energy Services
A construction crane barge (delivery: 4Q09) and two multi-function support vessels (delivery: 1H10 and 2H10) are yet to be added to Ezra’s offshore fleet. These will not only increase Ezra’s offshore depth
capability for the usual support services, but will also open up a new service offering – subsea inspection, maintenance & repair. Ezra is also expecting to charter two liftboats from Ezion Holdings in 2H09 and 1H10.
Then Ezra will also be able to service wells at offshore platforms.

EOC’s performance to pick up
Through EOC, where Ezra has a 49% stake, it offers oil production services by operating a floating, production, storage and offloading (FPSO) platform, known as the Lewek Arunothai. This is chartered to
Thailand’s PTTEP. As we understand, gas production has been delayed since November 2008. However, we expect the FPSO to start contributing from June 2009 as gas production is up and testing is in its final phases.

Raising TP to SGD1.87 from SGD1.12; maintain BUY
We have increased our TP to SGD1.87. Firstly, it is predicated on rolling onto FY10 earnings. Secondly, we employ a P/E multiple of 9x now (in line with Ezra’s average historical P/E) from 6x previously (in line with
peers). New vessels and services should be the catalysts to earnings growth.

[winston]

EZRA HOLDINGS - Oil services firm Ezra Holdings said on Thursday it will issue 78 million shares at S$1.185 to raise S$92.43 million ($63.48 million). The money raised will be used to pay down debt and fund capital expenditures. Ezra shares closed at S$1.30 on Wednesday.

[Aspellian]

Direct holdings of shares in Ezion by Ezra
No. of shares held before the change 30,000,000
As a percentage of issued share capital 4.21 %
No. of shares held after the change 100,000,000
As a percentage of issued share capital 14.02 %

Hi Musicwhiz, did Ezra subscribe to 70million shares to Ezion at $0.62 or the placement agent still looking for purchasers of these new shares?