Ezra 1 (May 08 - Dec 09)

[winston]

Hi MW,

Thanks for the kind write-up on Ezra.

BTW, what are the risks that you see, with regards to their Vietnamese business and yards ?

Take care,
Winston

[Musicwhiz]

Hi Winston,

You are most welcome, as an active shareholder, I keep a close watch on the company, its industry and also its competitive landscape as well as economic events which may impact the company and its stakeholders.

For their 2 Vietnam yards, one possible downside could be higher costs in terms of completing the shipyards (due to higher raw material prices such as steel and sand) as well as higher personnel costs (due to record high inflation). However, since the shipyards will be capitalized onto their Balance Sheet, I expect any associated depreciation difference to be immaterial as shipyards usually can last quite a number of years.

Another possible concern is the devaluation of the VND, but since Saigon Shipyard contracts in USD, there is a natural hedge there. It would be more worrisome if their contracts were denominated in VND as they would suffer an exchange loss when settling their receivables.

Other possible concerns are the deteriorating economic environment in Vietnam at present which may scuttle some potential deals or tie-ups (just speculating !), or possible strikes occurring as a result of the record high inflation of 25.2% in Vietnam.

Investing in a company means taking in all these risks and putting our faith in Management, that they can steer through the rough seas and come out relatively unscathed. As a shareholder of Ezra for nearly 3 years, I have confidence that Management can grow the company slowly but steadily.

Regards,
Musicwhiz

P.S. - Below are some recent updates on the company, FYI.

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Dear all, some quick updates on Ezra in the last few days.

1) Ezra announced the delivery of EOC's first FPSO Lewek Arunothai, which has already clinched a US$400 million charter to an oil major for 3 years, with options for 2 years extension. This charter will boost FY 2009 earnings. EOC is 48.9% owned by Ezra.

2) Ezra has established a multi-currency medium term note programme worth S$500 million (sounds similar to Swiber eh ?), with UOB as arranger and Barclays + UOB as dealers. Under the programme, Ezra can issue a variety of notes with either fixed or floating rates. I believe Ezra has established this programme to fund their acquisition of the MFSV in order to scale up their fleet to the next level.

In previous press releases, it was mentioned that the Group would use a combination of bank borrowings and debt financing to fund the acquisitions. Thus far, they are not resorting to equity financing or a rights issue which is good for shareholders. Still, there is the question of gearing and whether S$500 million will seriously increase their gearing ratio. I would expect the company to announce their first notes issuance very soon, in order to capture the current low interest rate environment.

[tinpeng]

Hi,

I spoke to someone from Ezra when EOC got listed last year. Heard that EOC will be quite profitable by Jun'08.
Debt financing maybe a good thing as current interest rates is low.

[winston]

Resignation of Independent Director Description:

The Board of Directors ("Board") of Ezra Holdings Limited ("Ezra") wishes to announce the resignation of Mr. Teo Peng Huat as an Independent Director,Chairman of Audit Committee and Remuneration Committee and Member of Ezra's Nominating Committee with effect from 2 July 2008 due to his increasing work responsibility and time commitment for the management of his expanding business outfit in China.

The Board would like to express its appreciation to Mr. Teo for his contributions to Ezra during his tenure as an Independent Director, Chairmano f Audit Committee and Remuneration Committee and Member of Ezra's Nominating Committee and to extend its best wishes to Mr. Teo for his future endeavours.

[winston]

Halted. No announcement yet.

[Musicwhiz]

3Q 2008 results to be released after market close. EOC has already released theirs.

[winston]

Vested.

Ezra’s deep water fleet and integrated operations propels 9M FY08 net profit up 577%

Revenue doubles to US$149m as fleet expands amid firm charter rates

Group in healthy net cash position with strong interest cover of 37.8 times

Continued fleet expansion and enhanced service offering will boost medium-term earnings

SINGAPORE, 10 JULY 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, has delivered yet another sterling performance, posting an impressive set of results for the nine months ended 31 May 2008 (9M FY08).

The Group’s net attributable profit soared 577% to US$168.7 million while turnover doubled to US$149.1 million in 9M FY08. This significant rise in revenue was largely the result of the robust offshore chartering and engineering fabrication markets.

Ezra’s Offshore Support Services was kept busy managing 32 vessels. Revenue increased by US$61.5 million due mainly to contributions over the nine month period from thirteen vessels including two AHTS that are in excess of 18,000bhp, as well as higher daily charter rates on renewal. Contributions from accommodation barge Lewek Chancellor and pipe laying barge Lewek Champion owned by Ezra’s production and construction arm EOC Limited (EOC) also helped lift earnings.

The Group’s Marine Services Division performed well too, with sales rising 134% in 9M FY08, thanks to increased procurement and equipment supply and engineering activities in Vietnam.

Said Ezra’s Managing Director, Mr Lionel Lee (黎才德): “We are reaping the benefits of our fully ntegrated offshore support services model and execution of our plan to build up our capabilities in the deep water segment, under which we provide clients with a comprehensive range of support vessels that can be deployed at different stages of an oilfield’s life cycle. This strategy has enabled us to strengthen our ties with various oil majors as they look to develop new offshore fields, especially those in deep waters.

With a committed capex of US$650 million for the construction of 5 large Multi Functional Supply Vessels (MFSVs) underway, Ezra expects to further enhance its position as a key global player in the deep and ultra deep water offshore support service sector.

“Our 9M FY08 net profit has surpassed the US$68.2 million we achieved for FY07 and we are on course this year to strike yet another record in the Group’s earnings history. At the same time, we have worked hard to strengthen our balance sheet through active capital management and Ezra is now in a strong position to move into its next growth phase.”

Ezra’s interest cover has improved significantly, rising to 37.8x in 9M FY08 against 9.3x in 9M FY07, and the Group has maintained a healthy cash position of US$144 million with a net cash of US$6.2 million.

Commenting on the Group’s prospects, Mr Lee added: “Deepwater exploration and production activity will remain buoyant as operators seek to tap the plethora of deepwater discoveries that remain to be developed.

“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.”

Ezra has been steadily increasing and fine-tuning its fleet to meet the arduous demands of the offshore oil and gas sector. Its Oslo mainboard-listed associate, EOC, recently announced that it had successfully delivered the Lewek Arunothai on time to a Southeast Asian oil company. This contract, worth up to US$400 million, is its largest to-date in value terms. Among the biggest gas FPSOs operating in the world, the Lewek Arunothai will be deployed in one of the largest natural gas fields in the Gulf of Thailand.

[Musicwhiz]

Thanks for posting Winston.

Since you are vested, what is your opinion of their results ? Thanks.

[winston]

Hi MW, I can share some notes over the wekend.

In the meantime, the following is from Kim Eng:-

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Ezra Holdings – 3QFY08 results (Johnny, DID: 64321431)
Previous Day Closing price: $2.24
Recommendation: BUY
Target price: $3.12

Robust results amid firm charter rates
Ezra reported an increase of US$75m (101% Y/Y) in revenue for 9MFY08, boosted by higher daily charter rates on fleets renewal, maiden contribution from its 2 vessels (Lewek Trogon and Lewek Toucan; 2 AHTS with over 18,000 BHP) and a 134% Y/Y surge in revenue from the Marine services.

Earnings jumped 78% Y/Y in 3Q08 to US$17.7m. Note that the reporting currency has been changed from the SGD to USD with effect from 1 Mar (3Q).

Ultra-deep water offshore play
A total of 8 offshore support vessels are slated to be delivered over the next 3 years, including 5 Multi-Functional Support Vessels (MFSV) in excess of 27,000 BHP with capability to operate in the harsh conditions of North Sea. Day rates for AHTS in the North Sea are expected to stay high at US$50,000/day according to Lorentzen and Stemoco. We estimate that these 5 vessels will contribute over 50% of FY10F revenue, based on US$3-3.5/bhp/day for vessels having more than 20,000 BHP.

Venture deeper; gearing higher
We estimate net gearing to hit 40-50% in FY09-10 on a consolidated basis. Typically, Ezra works on 70% by ship financing and 30% by equity on newbuilds. Ezra has already established an $500m multicurrency medium-term note programme which is used primarily to meet the capex requirement for the 5 MFSVs.

First FPSO charter contract to lift earnings from FY09
EOC has taken delivery of the first FPSO backed by a US$400m charter contract over 4 years, with an extension option up to 3 years, which is set to operate in one of the largest natural gas fields in the Gulf of Thailand. In addition, other vessels such as Lewek Conqueror and Lewek Champion may likely be chartered to assist the FPSO.

Reiterate BUY
Our SOTP-derived target price of $3.12 comprises of $2.69/share from core offshore support and marine business, $0.37/share from 48.9% of EOC and $0.06/share from 15.5% in Ezion, both based on market valuation. Risk-reward profile looks attractive with a 39% upside. Reiterate BUY.

[winston]

Vested. From DMG:-

Ezra Holdings: Stellar set of 3Q08 results (BUY\S$2.24\Target S$3.21)
Serene Lim (62323897, [email protected])

Impressive set of 3Q08 results. Ezra Holdings (Ezra) posted a sterling set of 3Q08 results last evening. Topline surged 85% YoY (and 11% QoQ) to US$55.2m due to maiden contributions from two 18,000bhp AHTS (Lewek Trogon and Lewek Toucan), higher daily charter rates on FYE renewal, and increase revenue from Marine Services Division.

This flowed down to the bottomline which soared 78% YoY (and 29% QoQ) to US$17.6m. Beginning this quarter, Ezra’s reporting currency has been changed to US$, eliminating any foreign currency translational losses should US$ continue to weaken against the S$.

Results largely within our expectations. On the back of a positive climate in the offshore support market segment, Ezra’s managed fleet of 32 vessels, Ezra’s 3Q results were largely in line with our expectations. Moving forward, on a full year basis, we have forecasted FY08F revenue at US$186.2m, as well as recurring net profit of US$44.5m. However, we have lowered our FY09F earnings to US$63.6m as we project higher administrative cost to incur.

Significant contributions from EOC Limited. Ezra’s Oslo mainboard-listed 48.9% associate EOC, offers offshore construction, transport, installation and floating production services. It manages two heavy lift accommodation crane barges, a pipelay vessel and has recently taken
delivery of a Floating Production, Storage, Offloading facility (FPSO) Lewek Arunothai.

According to Upstream newspaper, EOC is one of the preferred bidders to supply a leased
FPSO to Premier Oil’s oil project in Vietnam. UK-based Premier Oil is currently evaluating the
bidders’ proposals and expected to make an award recommendation by end July. We believe
EOC may be remoulding the successful conversion of FPSO Lewek Arunothai from an old
tanker for this Premier Oil’s project.

Target price lowered to S$3.21. As we have assumed a lower currency exchange rate of
S$/US$1.32 for FY09F EPS and used EOC’s last closing price of S$3.99 (down from S$4.87),
our target price has been lowered, based on sum-of-the-parts valuation. Reiterate BUY.