Ezra 1 (May 08 - Dec 09)

[winston]

From Musicwhiz with thanks.

Citigroup, July 11, 2008

Buy: A Bumpy 3Q08, But Business Model Remains Resilient

Gross margin disappoints — 3Q08 gross margin dipped to 28.7% from 35.0% in 2Q08.
Delivery delay of one of Ezra’s newbuilds resulted in more costly third party vessels being deployed to fulfill existing charters. However, higher associate income from EOC partially offset profit squeeze in the core business. 9M08 recurring net income was ~70% of our original FY08 estimates.

Delivery delays not uncommon — Our industry checks reveal extremely tight yard capacity, severe equipment shortage, and project delays at many yards. However, vessel owners have little choice but to bear the costs of delivery delays and possible budget overruns. Most of Ezra’s remaining newbuilds are slated for FY10 delivery but may be delayed. We revise our FY08-09E earnings by 3-4%, but downgrade FY10E earnings by 27%.

Sound business strategy — Despite this, we remain confident of Ezra’s business strategy: 1) demand-supply dynamics remain largely unchanged. The cycle will likely be prolonged and day rates sustained;
2) Ezra’s integrated business model provides a stable earnings platform stretching across the entire
oilfield services life cycle, and is better able to weather the industry volatility.

Remain confident — We believe share price catalysts remain intact:
1) 4Q08 gross margin will likely rebound – Ezra’s delayed newbuild vessel has been delivered in Jun-08 and will replace third party vessels;
2) potential FPSO win in Vietnam (see our report on 7 Jul 08);
3) stronger day rates for charter renewals (spot rates >30% above our assumptions).

We cut our TP to S$2.95, but maintain our Buy (1M) rating.

[winston]

Vested. From OCBC:-

Close to a near-term support

- Ezra has lost approximately 30% since it peaked at S$3.14 in May 08.

- Given the strong volume on the sell down over the last few trading sessions, we anticipate that Ezra could slip further. However, we feel the price is close to a support

- The inverted head and shoulder neckline formation provides near-term support around S$2.10; coupled with the display of positive divergence from the stochastic indicator, we feel any price drop from hereon would be limited in the near-term.

- The 1st support is set at shoulder level at S$2.04, which is also in proximity to the neckline, hence we feel the S$2.04 - 2.10 price range is a strong support level.

- We anticipate a rebound from these support levels, which would take Ezra up to test resistance at S$2.44, which is in proximity to the 100-day moving average at this juncture.

[winston]

Vested.

New Issue-Ezra Holdings issues S$50 mln 3yr bond

SINGAPORE, July 24(Reuters) - Following are terms and conditions of a bond to be issued on August 01, 2008

Borrower Ezra Holdings Limited

Form of debt Fixed Rate Medium Term Note

Issue Amount S$50 million Coupon 5.285% pa semi-annual Issue

Date August 01, 2008 Maturity Date August 01, 2011

Coupon Payment Date 01 February and 01 August Commencing on 01 February 2009

Denominations S$250,000 Lead Manager(s) Barclays Bank PLC & United Overseas Bank

[Musicwhiz]

Thanks Winston. 5.28% semi-annual ? I hope they have the cash flows to pay for that ! Sounds expensive when compared to Swiber's close to 4% interest rate on their notes. I will wait for more details from the company.

[winston]

Vested. From CIMB:-

• [b]Early mover in deepwater fleet expansion.[/b] Ezra is one of the few Singapore offshore service players with the foresight to expand its offshore support vessels (OSV) aggressively from six AHTS and crew boats in 2003 to its current 29 vessels. Ten are equipped with deepwater capabilities. By 2011, Ezra will be operating the largest and most modern fleet of deepwater vessels in Singapore.

• Penetrating international FPSO market. In 2007, Ezra spun off its construction and production arm by incorporating EOC and listing it on the Oslo Stock Exchange, to tap a shift in the oil and gas industry from exploration to production. EOC recently emerged as the frontrunner to supply a leased FPSO to Premier Oil in Vietnam, competing with international operators such as SBM Offshore and Modec. We believe this has lifted its profile in the international FPSO market with more new projects in the pipeline.

• Multi-year growth with a 3-year CAGR of 78%. Ezra’s core net profits will likely triple in FY08 on the back of its new fleet and stellar associate contributions. Continued capacity expansion and favourable long-term charter rates should support multi-year growth and a 3-year earnings CAGR of 78%.

• Initiate with Outperform; sum-of-the-parts target price of S$3.08. Ezra is trading at 11x CY09 core EPS, which is unjustified given the visibility and growth prospects of both its deepwater offshore support and construction and production businesses. Share-price catalysts could include new FPSO charters, offshore construction contracts and the successful delivery of deepwater vessels.

[Musicwhiz]

An article from Business Times. My comments: Swiber and Ezra are operating in an Asian environment and thus their cost structures are different from the larger and more established players such as Prosafe and Tidewater. Also, most of their projects centre in Asia which the bigger players are unwilling to touch due to unfamiliarity. Thus, I would assume that both companies can continue to maintain their niche focus in Asia as well as their competitive advantage, notwithstanding rising costs.

Business Times - 25 Aug 2008

Smaller players ride crest of maritime boom

Offshore and marine service providers are making quiet gains but they'll need to look out for inflation and competition in region By VINCENT WEE

WHILE the multi-million dollar deals of the big rig builders tend to hog the headlines, the recent quarterly results of the lesser known providers of services to the offshore and marine industry show they have also been making quiet gains on the back of the same boom.

These can be divided into two main groups - the smaller service support companies focused on basic services and maintenance and building, and the larger capitalised offshore industry players with bigger ambitions. Companies like ASL Marine and Jaya Holdings fall into the former, while Swiber and Ezra make up the latter category.

The first group comprises smaller players that focus on providing tug, supply and other services to the offshore industry as well as some shipbuilding and ship repair. The biggest of these is Jaya with a market cap of nearly $1 billion and an aggressive fleet expansion programme set to bring it up to 86 vessels by 2011.

Jaya reported a 24 per cent rise in full-year profit to $149.8 million on flat revenue of $307.2 million. Not surprisingly the offshore shipping division contributed the most ($84.6 million) to profits on the back of a good 54 per cent gross profit margin from chartering and sale of vessels. The shipbuilding division was the other main contributor with a 14 per cent rise in profit to $59.6 million.

Next up would be ASL Marine, although its fleet makeup and revenue composition is quite different. Although ASL has a fleet size of 180 vessels, the bulk of these are smaller tugs and barges with only four anchor handling tugs. The mainstay of the group's chartering business is the infrastructure sector where its tugs and barges transport construction materials.

ASL leverages on the oil and gas boom by building vessels to support the industry. Although a relatively low margin (10.3 per cent) business, a 20.5 per cent jump in revenue to $244.2 million yielding $25.1 million in profits still makes it a handy growth driver. A strong $693 million order book puts it in a good position for the next couple of years as well.

The third leg of the business is ship repair and conversion where revenue increased by more than half to $68.2 million and profit nearly doubled to $21.2 million on margins of 31.1 per cent. ASL attributed the gains to both an increased number of ship repair and conversion jobs undertaken as well as higher margin type jobs.

ASL has an interesting model where over 60 per cent of full-year revenue of $400.4 million comes from shipbuilding but profit is almost equally spread out between the three divisions. Ship chartering accounted for 36 per cent, shipbuilding 35 per cent and ship repair 29 per cent of gross profit of $72.6 million.

For the offshore industry players, deepwater exploration is the future and they know it. Ezra and Swiber are the ones with the biggest ambitions and the most aggressive expansion plans. They are the ones that are best-positioned to benefit from the deepwater exploration boom taking place now and are putting in place plans to take advantage of this.

Ezra already has an integrated range of vessels for charter across a broad spectrum of the support supply chain. These include anchor handling, towing and supply vessels (AHTSs), anchor handling tugs (AHTs) and fast crew utility boats, a jack-up rig, two heavy lift accommodation crane barges, a pipelay vessel and a floating production, storage and offloading facility (FPSO).

The group is having a sterling year with profit for the third quarter ended May 31, up 77 per cent to US$17.4 million and revenue up 85 per cent to US$55.2 million. For the first nine months, profits leaped six times to US$168.7 million and revenue doubled to US$149.1 million. Ezra attributed the increase to the robust offshore chartering and engineering fabrication markets. The offshore support services division was kept busy managing 32 vessels. Higher charter rate renewals and better rates from bigger vessels boosted the results as did contributions from speciality vessels like accommodation barge Lewek Chancellor and pipe laying barge Lewek Champion owned by Ezra's production and construction arm EOC.

Ezra has made a break into the FPSO market with EOC's US$400 million Lewek Arunothai contract in Thailand and is setting its sights firmly on making further inroads. It is spending US$650 million to build five large Multi-Functional Supply Vessels (MFSVs) and is looking to the deep and ultra deep water offshore support service sector for growth.

'We are reaping the benefits of our fully integrated offshore support services model and execution of our plan to build up our capabilities in the deep water segment,' said managing director Lionel Lee. 'In view of the opportunities just waiting to be tapped in this segment, Ezra will remain committed to growing a young, technologically advanced, deepwater capable fleet as well as enhancing our service offering. We expect these moves, which includes our latest foray into the FPSO segment, to boost our earnings in the medium term.'

Swiber did even better, with profit for the second quarter ended June 30 more than tripling to US$20.8 million and revenue up almost five times to US$124.5 million. Key revenue drivers in Q2 were increased offshore construction projects during the quarter which saw the group undertaking six simultaneous projects in Malaysia, Indonesia and Brunei.

Rapid expansion will see it ramp up its fleet to a total of 51 by 2010 which it says will be funded by equity and bond issues, cash and sale and leasebacks. Swiber points to the expected growth in global offshore spend from US$254 billion last year to US$361 billion in 2012 for its future prospects. A key future revenue contributor is its Equatorial Driller deepwater drilling ship which Swiber bills as a cost-effective solution for deepwater drilling. It has, however, yet to secure a contract for it.

The group is also branching out into aspects of the energy market. At its Q2 results briefing, Swiber highlighted the prospects of the global offshore wind market with £pounds;10.1 billion (S$26.2 billion) of capex forecasted from 2008 to 2012. Of course, it will also continue to benefit from its traditional strengths in offshore engineering, procurement, installation and construction where the subsea market is expected to grow 25 per cent from 2007 to 2011 and reach about US$41 billion. Growing maintenance, major modification and future decommissioning issues from the world's huge ageing offshore installations is yet another steady market.

While the prospects for the sector remain bright, there are issues to take note of. Like their bigger counterparts, the pure tug operators and builders will need to keep a keen eye on costs. Singing the same tune of hedged steel costs and measures to keep labour and other administrative costs in check, the cost inflation pressures affecting the global industry are a factor that must be closely watched in relation to future contract values.

Competition from lower cost yards in China and elsewhere could also be a factor in future. ASL managing director Ang Kok Tian says that his main Batam yard is priced between Singapore and China. Both ASL and Jaya have yards in Batam and China, but if the current new order boom at the Chinese yards dissipates as some market predictions say it will, they may become more aggressive in pitching for the same lucrative market these two companies are benefiting from with an inevitable detrimental effect on margins and profits.

Risks for the two offshore service players come mainly from overextension of capacity. Soon after sealing the Lewek Arunothai contract, Ezra in June announced it had established a $500 million multi-currency medium term note programme. Swiber also did a $300 million multi-currency medium term note programme last July and in March raised $100 million through a bond issue.

While there are clearly many opportunities in offshore development segment, the capex is also correspondingly high. And there are other international players with deeper pockets and more experience. When push comes to shove, playing with the big boys may end up being a bruising experience for the unwary.

[winston]

Vested.

Why is Ezra up today ?

No news on SGX website.

The only thing that I can pick up is that the strength in the US$ is good for them as their contracts are in US$.

[Musicwhiz]

Latest news on Ezra's EOC from Energy Current:-

EOC front-runner for Chim Sao FPSO
9/22/2008 9:47:46 AM GMT

VUNG TAU, VIETNAM: Singapore's EOC Ltd. emerged as the front-runner among the contractors shortlisted to supply a floating production, storage and offloading facility (FPSO) for Premier Oil's Block 12W Chim Sao oil project offshore Vietnam. Premier is understood to have highlighted EOC as the preferred bidder at an industry conference. Industry sources said the two parties are likely to finalise the contract over the next two to three weeks.

The FPSO will support the oil production at the Chim Sao and the nearby Dua fields. First oil is expected to flow from Chim Sao in 2010 followed by Dua in 2011. The proposed production faciltiies also include two wellhead platforms for Chim Sao and a third wellhead platform in the Dua field.

[winston]

From DMG:-

Ezra Holdings: Another FPSO contract in the making? (BUY\S$1.34\Target S$2.30 )
Serene Lim (62323897, [email protected])

Another FPSO venture? According to Upstream news article dated 28 Aug 08, Ezra Holdings’ 48.9%-owned Oslo listed associate, EOC, is the likely candidate to win the Floating Production, Storage and Offloading (FPSO) vessel chartering contract for Premier Oil’s Chim Sao (Blackbird) and Dua offshore oil project in Vietnam. This project entails plans for production of oil, scheduled to come on-stream in mid-2010, via two wellhead platforms tied back to a leased FPSO. It is understood that EOC has defeated industry’s leaders such as SBM Offshore, Modec and Viking-Vanguard Oil & Gas to clinch this FPSO contract. The Upstream article also mentioned that the contract details are still currently under “interim agreements”, pending government approvals.

This follows shortly after maiden charter contract for Lewek Arunothai. In Jun 08, EOC secured a US$400m charter contract for 3 years with extension options of up to 2 years – its largest in value terms. Lewek Arunothai was converted from an Aframax tanker by Keppel Shipyard. The successful transformation of tanker MT Kitty Knutsen to Lewek Arunothai was a stepping stone to a bona-fide placing in the FPSO community. This FPSO is currently used for operations in one of the largest natural gas fields - The Arthit North project - in Gulf of Thailand.

Keeping our earnings estimates intact. Reiterate BUY. While the news may seem preliminary subjected to final government approvals, we believe that Ezra, through EOC, has a balanced portfolio to cater to the entire oilfield life cycle. We remain concerned over Ezra’s (and EOC’s) aggressive expansion plans that may inherently heighten debt financing risks. At yesterday’s closing price of S$1.34, Ezra is trading at 12.7x FY08F EPS and 8.4x FY09F EPS. Our fair value remains at S$2.30. Reiterate BUY.

[winston]

Halted now.

Ezra’s inked US$104m worth of charters reflect strength of offshore oil & gas market

Contract periods of 1-7 years involve both new and renewal charters on 4 Anchor Handling Towing and Supply vessels

Expects positive earnings contribution from FY09

Higher renewal rates point to firm offshore support services demand for better equipped vessels

SINGAPORE, 20 OCTOBER 2008 FOR IMMEDIATE RELEASE

Ezra Holdings Limited (Ezra, the Group or 以斯拉控股), a leading integrated offshore support and marine services provider in the offshore oil & gas (O&G) industry, today announced US$104 million worth of term charter contracts for four Anchor Handling, Towing and Supply vessels (AHTS).

Under the contracts, which comprise both new and renewal charters, Ezra will charter the AHTS to various parties for operation in Southeast Asia for periods ranging from one to seven years, inclusive of extension options.

Said Ezra’s Managing Director, Mr Lionel Lee (黎才德): “Our renewal charters are enjoying 10-15% higher average rates and reflect the firm demand for offshore support services in the oil & gas sector, particularly for better equipped vessels such as ours.”

“Our leading position in Asia positions Ezra well to benefit from the continued high level of exploration and production activities in the region, especially in the Southeast Asia. We expect the contracts to contribute positively to our bottomline from FY09.” As a leading integrated provider of offshore support services, Ezra is committed to its fleet expansion programme.

Among Asia’s first to focus on deepwater capable support vessels, the Group will take delivery of one large AHTS and five ultra-deepwater Multi-Functional Support Vessels (27,000 and 30,000 brake horsepower) in the next 24 months. Also joining
Ezra’s diversified fleet are two self-propelled jack-up rigs and an ultra-large pipelay accommodation, well service and maintenance vessel.