Ezra 1 (May 08 - Dec 09)

[winston]

Ezra's Q109 net profit falls 93% By CHEW XIANG

EZRA Holdings on Wednesday said net profit for its first quarter to Nov 30 fell 93 per cent to US$9.3 million from US$138.9 million in the year-ago period.

Sales were up 149 per cent to US$113 million but other operating income fell to negative US$10.6 million from US$140.3 million, due to non recurring gain from the disposal of interest in a subsidiary, the company said.

Fully diluted earnings per share was 1.60 US cents, from 23.92 US cents a year ago.

Ezra said it was 'cautiously optimistic' that current trends in oil and gas activity would continue in the next 12 months.

Ezra managing director, Lionel Lee said: 'Demand for production and construction work from existing oil fields remains healthy, particularly in the Asia-Pacific region. As a result, our medium-to-large sized offshore support vessels will be fully engaged.

'We are reviewing our cost structure and our newbuild orderbook, so as to ensure that our balance sheet can support future acquisitions of cheaper assets over the next 12 to 24 months,' Mr Lee said.

[winston]

From DBS:-

Ezra’s 1Q09 net profit of US$9.3m was below expectations (-93% y-o-y) primarily due to large net forex losses of US$11.7m recorded in 1Q09. Revenue came in at US$113.0m (+149% y-o-y) but gross margins slipped 16.4ppt to 25.4%.

We are lowering FY09 net profit forecast to US$51.2m to factor in forex losses. Maintain Buy; TP: S$1.25.

[winston]

From CIMB:-

• Below expectations. 1Q09 core profit of US$9.3m (+255% yoy) was 46% below our estimate and 44% below consensus. The shortfall was mainly due to US$19.8m of unrealised forex translation losses from cash balances denominated in the Norwegian kroner (about 380m NOK). The average exchange rate for NOK/US$ was 5.2 in Sep 08 but depreciated to 6.9 by end-Nov 08. Stripping out the forex impact, 1Q09 core profit would have been about US$28m, 60% above our estimate on stronger-than-expected revenue.

• Sales grew 149% yoy to US$113m, led by growth in all sectors. Offshore Support Services grew by 24% to US$50m to account for 45% of total sales, lifted by six new AHTS delivered in FY08 and 1Q09. Marine Services revenue jumped to US$23m from US$3m in 1Q08 mainly on a better performance in Vietnam. There was also maiden revenue of US$40m from Ezra’s new Energy Services division, specialising in oil wellhead intervention.

• EBITDA margins slipped 150bp yoy, affected by the unrealised forex losses and lower margins from Marine Services and Energy Services. Gross margins dropped from 42% in 1Q08 to 25% in 1Q09.

• Net gearing to improve upon capex cutback. We have scaled back our capex assumptions to US$350m from US$700m for FY09-11, projecting cuts after Ezra completes its capex review by Feb 09. Accordingly, our net gearing forecast improves from 1x to 0.5x for FY10 and 0.7x for FY11.

• Earnings estimates cut by 12% for FY09-10 but raised by 2% for FY11. We have revised our forecasts to incorporate:-
1) higher revenue from Energy Services;
2) lower margins from Marine and Energy Services;
3) lower capex with only two MFSVs to proceed from end-FY10;
4) a higher effective tax rate of 10% (from 6%); and
5) higher chartering rates (US$100k/day) for MFSVs.

• Maintain Outperform, though target price reduced to S$0.96 from S$1.05, still based on sum-of-the-parts valuation, following our earnings reductions. We believe that current valuation of about 3x CY10 P/E is undemanding against earnings certainty backed by long-term charters and 3-year EPS growth of 22% till FY11. We believe that market concerns over Ezra’s high gearing should be alleviated by scaled-back capex plans. Key risk to earnings includes the volatility of NOK/US$.

[winston]

From DMG:-

Results showed muted growth. Ezra Holdings (Ezra) released its 1QFY09 results yesterday. Topline increased by 149% YoY but fell 5% QoQ to US$113m. Core operating profit, excluding one-off exceptional gains and net forex loss, was US$10.6m - a turn-around from a loss of US$6.9m a year ago and 84% QoQ improvement, thanks to lower administrative expenses and depreciation charges. The net forex loss arose from the translation of foreign currency bank deposits and receivables denominated in Norwegian Kroner and Australian dollars.

Lower contribution from Ezra’s Oslo-listed associate, Eoc Limited, was mainly due to the absence of earnings from Lewek Arunothai
and decreased charter income for its vessels.

Capex reviewed. Ezra initially planned for a capex of US$750m over these two years, of which US$650m would be used for five ultra-deepwater Multi-Functional Support Vessels (MFSVs) and one AHTS. Another US$100m would be set aside for the Vietnam Yard, Academy and Energy Services business division. We believe that Ezra is finalising the termination terms with Keppel Singmarine. Further, we understand that Ezra is reviewing its capex plans of two other MFSVs to be built in a Norwegian yard, with a likely inclination to abort construction of these vessels. As such, we have trimmed our capex accordingly and revised down our FY10’s revenue and net profit estimates by 7.8% and 6.4% respectively.

Bracing for tougher times ahead. Unless oil price stabilises at higher levels, we would continue to see further capex cuts and fewer drilling activities. This will pose a difficult operating environment for Ezra. In addition, we hope to seek greater clarity over Ezra’s capex plans, progresses at the Vietnam yards and whether there is an over-supply situation for offshore support vessels. Given Ezra’s exposure to contingent liabilities arising from sale-and-leasback financing and a fleet comprising of high capacity vessels, we opine Ezra’s
greatest risk is the vulnerability to a decrease in chartering rates. As we see no near-term catalyst, we maintain our Neutral rating and target price of S$0.67, still based on sum-of-the-parts valuation

[Musicwhiz]

Reading all the reports make me want to laugh out loud sometimes. So many views, so many opinions and so many ways of interpreting a company's performance and prospects. Who's right and who's wrong ? Perhaps no one.

The point is we have to objectively assess the facts and ensure we purchase with a margin of safety in case the worst-case scenario occurs (I call this the Murphy's Law application).

[kennynah]

how to be objective when interpreting the figures is already a subjective effort ?

[Musicwhiz]

how to be objective when interpreting the figures is already a subjective effort ?

Sorry, what I meant to say was to assess the facts as they are and to the best of one's ability. I didn't mean to say that interpreting the numbers was objective.

[winston]

In bear market, I can agree with the recommendations of the "most pessimistic" Analyst for some Margin of Safety..

In bull market, I can get myself to agree with the "most optimistic" Analyst for some Margin of Greed

[winston]

From DBS:-

Weathering the rough seas
We are reiterating our Buy call on Ezra, with TP adjusted slightly to S$1.29. The stock has been sold down c.15% since it reported large unrealised forex losses in its 1Q09 results. While we view this as one-off, we also believe Ezra is better positioned to weather the current uncertainty with its diversified fleet and integrated operations. In the near term, the actual commencement of production on EOC’s FPSO may prove to be a re-rating catalyst.

Sold down 15% post 1Q09 results. Since revealing a large US$19.8m unrealised forex loss in its recent set of results, Ezra has been sold down 15%. As a recap, the forex losses arose primarily due to the unexpectedly sharp 29% depreciation of the Norwegian Kroner (NOK) against the US Dollar over 1Q09. The group had kept a large amount of NOK in fixed deposits amounting to around US$71m as of end August 2008 to pay for its equipment purchases.

Better positioned to weather uncertainty. We believe the sell down of this counter is unjustified, as such wild
swings in the Norwegian Kroner seen over the September to November period are unlikely to occur again. In addition,
Ezra’s diversified vessel fleet and integrated operations allow it to cater to the different stages of oilfield development, and hence, better positioned to weather the current uncertainty. Its offshore support fleet is chartered out on long-term contracts, averaging 4 to 4.5 years, with around 78% of its current motorised fleet deepwater capable, stepping up to c. 82% by FY11.

FPSO contributions to kick in soon? We view the impending commencement of production on EOC’s first FPSO, Lewek Arunothai, as a potential near term price catalyst. It is currently contracted out to PTTEP in the Gulf of Thailand on a 3 + 2 years charter contract. With day rates of US$228,000 for the first 3 years, and US$168,000 for the next 2 years, this will be a significant and recurring revenue generator for EOC, which will also have significant impact on Ezra’s bottom line.

[Musicwhiz]

Dear all, EOC Limited has released an announcement about the securing of a US$68 million contract for Lewek Conqueror lasting 5 years till 2014.

Details are in the link below:-

http://feed.ne.cision.com/wpyfs/00/00/0 ... kr0003.pdf