Ezra 1 (May 08 - Dec 09)

[winston]

Vested. From DBS:-

Comment on Results
9M08 revenue and net profit came in within expectations and accounted for 72% of our full year estimates. Revenue rose 101% yoy benefiting from a larger fleet, higher charter rates and higher
revenue from marine engineering. Gross margins were lower, probably due to a higher percentage of revenue from marine engineering which command lower margins, a similar trend we saw in 1H08.

EBIT rose a lower 10% to S$17.6m, with margins declining to 11.8% from 21.5%, due to higher admin costs from a higher headcount as well as a provision of S$19.1m (est US$14m) made in 1Q for staff incentives. Excluding this, EBIT margins would have been maintained at 21%.

Balance sheet is strong with Ezra in a net cash position, allowing it to fund its 5 new MFSVs and yard upgrading which is estimated to cost around US$700m. This will likely take its debt:equity ratio up to 0.8 by 2010.

Growth is visible. Growth for the offshore chartering business will be underpinned by vessel deliveries and rising rates. Based on orders in hand, Ezra’s fleet will rise from 25 vessels as at 1HFY08 to 28 by end FY08 and to 32 vessels by FY10. Motorized capacity will rise by 76%; from 204,600 bhp to 360,600 bhp over 2H08 to FY10. Currently, 74% of its fleet is deep-water capable, rising to 85% by FY10 making it one of the leading players in this segment.

Saigon Shipyard is expected to be fully operational by year end and a second yard is being developed in Vung Tau, operational next year. Both yards should be able to support revenues of US$300-400m pa. Separately, EOC saw its first FPSO entering the fleet last month. Together with Ezra, EOC can leverage on its diversified fleet to gain more offshore transportation and installation projects.

Recommendation
No change in estimates. We expect net earnings (in S$ terms) to rise 96% in FY08 and 57% in FY09. Maintain Buy with a target price of S$3.15 based on 12x for chartering, 15x for EOC on FY09 earnings, and the current market price of Ezion.

[winston]

Singapore Hot Stocks-Ezra up on better-than-expected earnings

SINGAPORE, July 11 (Reuters) - Shares of oil services firm Ezra Holdings rose as much as 4 percent after it said its net profit for the third quarter of this year rose 77 percent to $17.4 million.

Ezra Holdings climbed to a high of S$2.33 with over 1.7 million shares changing hands.

Total net profit for the nine months ended May 31 was $168.7 million, a jump of more than six times from a year ago.

JPMorgan analyst Winnifred Heap said in a research note that the firm's third quarter results were slightly ahead of the bank's expectations. Ezra's fleet expansion is also expected to continue driving earnings growth.

"We continue to be positive on the offshore supporting services space on the back of strong dayrates and continual demand for young vessels, which we believe is currently under-appreciated by the market," Heap said.

The bank has an "overweight" rating on Ezra with a price target of S$4.00.

[DavidV]

Hi All,

A different perspective:

Ezra Holdings (EZRA SP, S$2.32) - Share price increased by 3% to S$2.32 despite 3Q08 core earnings of US$17.4m (up 77% yoy) coming in 22 % below consensus. Gross margins came in lower at 29% compared with 40% in 3Q07 and 35% in 2Q08.

DavidV

[kennynah]

DavidV :

welcome to Huatopedia, where everyday is a HUat HUat day !!!

[winston]

Hi MW,

I've not really spend a lot of time on this company and their business is actually outside my circle of competence. I have a small position to force myself to learn about their business..

Anyway, the following are some notes that I have:-

Pros:-
1) Good PEG; Good growth story
2) Good Margins
3) Good Industry
4) Good Management. I have seen the CEO on CNBC & Bloomberg a couple of times. Looks ok.

Cons
1) If they are such a good company, why did the share price collapsed from $2.90 ?
2) Why is there not more Institutional Support especially when there are good recommendations from the various Investment houses ?
3) Daily turnover is very small, ( May not be a negative thing, if one wants to push & dump )

Take care,
Winston

[iam802]

One point I am thinking of is why do Temasek (or its various subsidiaries) reduce their stake during the period of June from 7% to 1%.

[Musicwhiz]

Hi MW,

I've not really spend a lot of time on this company and their business is actually outside my circle of competence. I have a small position to force myself to learn about their business..

Anyway, the following are some notes that I have:-

Pros:-
1) Good PEG; Good growth story
2) Good Margins
3) Good Industry
4) Good Management. I have seen the CEO on CNBC & Bloomberg a couple of times. Looks ok.

Cons
1) If they are such a good company, why did the share price collapsed from $2.90 ?
2) Why is there not more Institutional Support especially when there are good recommendations from the various Investment houses ?
3) Daily turnover is very small, ( May not be a negative thing, if one wants to push & dump )

Take care,
Winston

Winston,

I would agree with you on the pros, except for "good margins" as their (gross) margins have been declining due to more construction and fabrication projects.

As for the cons, let me address those:-

1) Mr. Market has mood swings. He's a manic-depressive guy at this stage, apparently.
2) Institutions have their own reasons for buying/selling which we probably cannot fathom. They have a responsibility to their clients as well who may wish to withdraw monies irregardless of whether it seems rational, or not.
3) Daily turnover these days (in the few hundred lots) is already much higher than before the 1:1 bonus issue last year. Before that, it was in the tens of lots traded daily.

I still feel that there is potential growth for the company though it will slow as the company gets larger and "bulkier". Margins will most likely come down further before they stabilize, due to vessel delays (endemic to the industry).

[Musicwhiz]

One point I am thinking of is why do Temasek (or its various subsidiaries) reduce their stake during the period of June from 7% to 1%.

Hi iam802,

Kindly check back to the previous pages of this thread for the explanation for the apparent "reduction of stake". I had already explained this to Winston some time back. Thanks.

Regards,
Musicwhiz

[iam802]

MW,

Found your posts. Thanks for the explaination

[winston]

From Musicwhiz with thanks.

Goldman Sachs, July 11

Ezra Holdings (EZRA.SI)
Buy
Weaker than expected 3QFY2008 results, cutting estimates/PT

What's changed
Ezra changed its reported currency in its 9MFY2008 results, reporting net profit of US$169m. The results were mainly boosted by one-offs, including significant US$146m gains from the sale of EOC, recognized earlier in 1Q.

Without these, Ezra would have reported core profit of US$41m, vs last year’s US$14m. Though inline with our expectations, the top-line was very strong, largely reflecting Ezra’s expanded offshore support fleet operations.

Margins were, however, not as resilient; Ezra’s earnings disappointed with core net profit only 69% of our full-year forecast.

For 3Q, Ezra reported net profit of US$17m, which although it was significantly higher than the US$10m reported in 3QFY2007 and US$14m in 2QFY2008, was lower than we expected.

Implications
Given the change in the company’s reported currency, we are revising our earnings currency base to US$. We are also reducing our earnings estimates, mainly to factor in lower margins for its offshore support vessel business. While we expect some negative reaction by the market on the back of the poor results, we are maintaining our Buy rating.

In our view Ezra offers undemanding valuations and strong growth prospects. Being the leading regional offshore support vessel/contractor company, we continue to see Ezra as a key beneficiary of rising demand for such services within the region.

Valuation
We revised down our SOTP-based 12-m price target to S$3 (previous S$3.26). Our price target is based on 17X FY2009E P/E for offshore support and marine business, and the market value of its listed holdings in EOC and Ezion.

Key risks
(1) Lower-than-expected offshore support vessel charter rates,
(2) shipyard delays,
(3) global slowdown in E&P spending,
(4) project/execution risk.