Ezra Holdings

Ezra's associate EOC has released their 1Q 2012 results. Net profit went up more than ten-fold, and gross profit also surged a lot. All looks good for EOC, and Ezra will release their own 1Q FY 2012 results ended Nov 30, 2011 after market close today (currently halted).

EOC's balance sheet still has a lot of debt, and finance expenses increased 82%. Considering revenue is increasing at a faster clip than financial expenses, it looks OK for now. There is no breakdown given for the STatement of Cash Flows, but there is +ve cash inflow for Investing Activities which requires more scrutiny. What is the average capex level for EOC, and Ezra? Such questions will lead an investor to conclude if future growth will be funded more through financing cash flows, or operating cash flows.

(Not Vested)

The Straits Times
Jan 30, 2012
TALKING TO... EZRA HOLDINGS
Road warrior steers local company on global voyage
Player in offshore oil and gas sector also has roots in US and Europe

By Robin Chan

It is not easy taking a local company global. Just ask the fresh-faced honcho of Ezra Holdings, a home-grown player in the offshore oil and gas sector that now considers Europe and the United States home as well.

Managing director Lionel Lee, 39, relocated to Houston, Texas, in 2010 to oversee the company's integration of Norway's Aker Marine Contractor (AMC) and now splits his time across three continents, bridging time zones and cultural gaps.

AMC, which specialises in sub-sea construction and was bought for US$250 million (S$314 million) in late 2010, has a centre of excellence in Houston.

The company also underwent a name change to EMAS, which it uses internationally for its offshore business. It continues to be traded on the stock exchange as Ezra.

Mr Lee believes that when it comes to the huge task of integrating two companies, the adage that quality is better than quantity needs to be spun around on its head.

It is not just the quality of time, but the quantity that matters too, he says.

'You look at the best corporates in Singapore, the government-linked corporations that have done well overseas, like Keppel Corp. They send their best people to Brazil or to the Philippines,' he says, in an interview with The Straits Times on a trip back to Singapore.

'So your heart must be where the organisation is. If you want to grow in the other part of the world, you have to be prepared 150 per cent to move over there, run the business from there, and you have to be able to be there for as long as it needs to be.

'A lot of organisations, unfortunately, buy other organisations and think it's going to be on auto mode after that. It's not like that.'

So now, he is in a different time zone every two weeks, he quips.

The road warrior travels so often that his wife actually marked out his travel schedule for him, perhaps reminding him to make time for family too, which includes two sons aged eight and five.

His efforts are beginning to pay off. The company's backlog of construction orders has ballooned from nothing in March last year to US$850 million today.

'I think it is an extremely big feat by anybody's standards. The word our competitors use right now is that EMAS is actually annoying us, because they didn't take us seriously in the beginning.'

The firm won two contracts worth about 450 million Norwegian krone (S$97 million) from energy giant Statoil earlier this month.

'That was a huge job nobody thought we would ever win. So now it gives us a track record, it showcases our assets. What has changed dramatically for all the regions is that we are able to react much faster,' notes Mr Lee.

Its total order backlog stands at a record US$1.6 billion. He is optimistic that it will continue to grow despite the global economic uncertainty this year, with the company bidding for more than $5 billion worth of contracts.

'The momentum will continue, I don't foresee it dropping. I think we will continue to have a record order book for the next two years. There is a lot of work going on right now in Australia, Africa and South America.'

The company took a leap in 2008 amid the financial crisis. It wanted to diversify its earnings away from just Asia, identified a few targets and eventually found AMC to be the best fit, with its reach from the Americas to Africa.

'AMC had grown their business over 40 years. It is not easy for a company to establish relationships with people. It would have taken us probably another 20 years to get to where they were,' he says.

Today, he often describes Ezra, which employs 3,500 staff worldwide and has a market cap a shade under $1 billion, as a 20-year-old firm with a 40-year legacy.

The next step is to expand the business internationally in marine offshore services, sub-sea construction and in vessel building at its yards, while divesting its non-core assets.

He hopes to diversify the earnings stream of offshore support services from Asia, which accounts for 80 per cent, to 50 per cent, with the rest coming from everywhere else.

And he wants to add to his stable of yards - two in Vietnam and one in the US - with another in the recently oil-rich Brazil in the next 24 months.

Some analysts and shareholders have been critical of the AMC acquisition and the impact it has had on Ezra's net gearing and earnings. But Mr Lee insists they have got it wrong.

'If I was that short term, we wouldn't have spent so much effort to build a 20-year business ahead of us... We were taking a very long-term view and they were taking a short-term view.'

Mr Lee grew up following his father Lee Kian Soo to work at sea, and has been with the business for 17 years, joining right after graduating with a degree in international business from Australia.

Mr Kay Lim, regional head analyst of DNB Bank, says: 'He understands the operation, and is not the hands-off kind of boss. Without him, Ezra probably wouldn't have seen that kind of growth.'

Working with his father - who is co-founder and executive chairman - can be difficult at times, Mr Lee admits, as emotions get involved.

'You debate more. It's a lot harder, because of expectations, and you cannot understand certain things he has done or he can't understand certain things I have done. And it puts a strain on the family relationship... You wonder, why do you do it? You could be very happy without the office issues you debate about.'

But he adds that in the end, the advantage is that any decision will always be a united family one, with the long-term benefit of the company in mind.

Having spent more than a year abroad, Mr Lee is planning to relocate back to Singapore soon, after finding someone to oversee US operations. But while his geographical location will change, his ambitions for the company certainly will not.

'The day I don't grow the business, is the day that I will die. It is a challenge we put to ourselves. We have to grow to the next level and not stay where we are.'

chanckr@sph.com.sg

Business Times - 06 Mar 2012

Ezra clinches two new contracts

By CARINE LEE

EZRA Holdings Limited yesterday announced two new contract wins, boosting its order book closer to a record US$2 billion. The contracts, worth a total of US$131.5 million, were secured separately by its fabrication and subsea divisions.

'We had identified subsea services for our next phase of growth, and since our strategic acquisition of Aker Marine Contractors last year to form EMAS AMC, we have been able to push our group order book to almost US$2 billion in a short span of a year,' said Ezra's managing director, Lionel Lee.

Ezra's subsea construction division, EMAS AMC, was awarded a subsea, umbilical, risers and flowlines contract (SURF) for marine installation and pipe lay contract from Statoil. The US$55 million contract will see EMAS AMC involved in Fram H-Nord subsea development, the third phase of the development of the Fram Field, in the northern part of the North Sea.

Fram H-Nord will be developed with one satellite well tied back to the existing infrastructure at Fram Vest A2 template via twin flowlines and a control and service umbilical.

Under the contract, Ezra will be involved in the engineering, procurement, transport and installation of one 10' flexible production and one 4' gas injection flowline, both 5.3 kilometres long. Engineering, procurement and planning activities will commence immediately, and the offshore work is scheduled to commence in the third quarter of 2013.

The contract will be managed out of EMAS AMC's Oslo office and vessels from EMAS AMCs modern construction fleet will be utilised.

Separately, its fabrication division, TRIYARDS, won the US$76.5 million contract to fabricate and deliver a self-elevating mobile offshore platform/unit for an Asia Pacific-based client. TRIYARDS, which provides fabrication and vessel design, and engineering services, will manufacture the offshore unit at Ezra's second fabrication yard in Vung Tau, Vietnam.

They've been raising money consistently through debt and equity for the last few years. Quite glad I divested myself of Ezra back in late-2009.

Business Times - 13 Mar 2012

Ezra stock hit by share placement move

But some analysts see the counter's pullback as a buying opportunity

By LYNN KAN

EZRA Holdings' placement share plans pushed its shares down yesterday in the week's first trading session, but analysts are advising investors to stock up on the subsea installations player.

The stock plunged nine cents or 7.4 per cent to $1.12 yesterday after it unveiled plans late last Friday to issue 110 million new shares at $1.10 apiece that will raise gross proceeds of $121 million. Ezra intends to use the net proceeds for, among other things, general working capital and/or business opportunities.

CIMB said: 'We see opportunities to accumulate when Ezra's share price pulls back following the placement of 110 million shares.'

The placement plan is dilutive to existing shareholders by 11 per cent. Yet, it also comes with the promise of new contracts to come.

'The proceeds will be used for working capital, as Ezra executes its US$1 billion subsea order backlog,' added CIMB. 'We expect to hear of some contract win in the next two months as its tender book remains strong.'

DNB analyst Kay Lim points out that market fundamentals underpinning the oil and gas industry will be the chief judge of Ezra's share price.

'The market consolidation (Subsea 7-Acergy, SapuraCrest-Clough and Technip-Global Industries) has created a vacuum for another player to step up, as oil companies prefer more choices and competition,' he said.

'Ezra has a place in the subsea market to target the smaller projects in Asia-Pacific. Other key players will be kept occupied by the larger projects in the North Sea, Brazil, and West Africa.'

OCBC, however, raised the red flag that Ezra's actions of late indicate that it is still short of funds.

At end-February, Ezra slashed its stake in Ezion Holdings to 5.61 per cent from 14.02 per cent.

Even after the placement, OCBC estimates that Ezra will still need about US$207 million for its capital needs this year.

'This could be supported by divestment of non-core assets, as well as the debt markets,' said Low Pei Han, who downgraded the stock to 'hold' from 'buy'.

Somehow, market also do not reward companies that consistently grows their cash hoard. Sometimes really dunno what market is looking forward really - perhaps newflows and excitement that will give thrills but seldom build wealth

(13-03-2012, 05:19 AM)Musicwhiz Wrote: They've been raising money consistently through debt and equity for the last few years. Quite glad I divested myself of Ezra back in late-2009.

Business Times - 13 Mar 2012

Ezra stock hit by share placement move

But some analysts see the counter's pullback as a buying opportunity

By LYNN KAN

EZRA Holdings' placement share plans pushed its shares down yesterday in the week's first trading session, but analysts are advising investors to stock up on the subsea installations player.

The stock plunged nine cents or 7.4 per cent to $1.12 yesterday after it unveiled plans late last Friday to issue 110 million new shares at $1.10 apiece that will raise gross proceeds of $121 million. Ezra intends to use the net proceeds for, among other things, general working capital and/or business opportunities.

CIMB said: 'We see opportunities to accumulate when Ezra's share price pulls back following the placement of 110 million shares.'

The placement plan is dilutive to existing shareholders by 11 per cent. Yet, it also comes with the promise of new contracts to come.

'The proceeds will be used for working capital, as Ezra executes its US$1 billion subsea order backlog,' added CIMB. 'We expect to hear of some contract win in the next two months as its tender book remains strong.'

DNB analyst Kay Lim points out that market fundamentals underpinning the oil and gas industry will be the chief judge of Ezra's share price.

'The market consolidation (Subsea 7-Acergy, SapuraCrest-Clough and Technip-Global Industries) has created a vacuum for another player to step up, as oil companies prefer more choices and competition,' he said.

'Ezra has a place in the subsea market to target the smaller projects in Asia-Pacific. Other key players will be kept occupied by the larger projects in the North Sea, Brazil, and West Africa.'

OCBC, however, raised the red flag that Ezra's actions of late indicate that it is still short of funds.

At end-February, Ezra slashed its stake in Ezion Holdings to 5.61 per cent from 14.02 per cent.

Even after the placement, OCBC estimates that Ezra will still need about US$207 million for its capital needs this year.

'This could be supported by divestment of non-core assets, as well as the debt markets,' said Low Pei Han, who downgraded the stock to 'hold' from 'buy'.

(13-03-2012, 01:47 PM)greengiraffe Wrote: Somehow, market also do not reward companies that consistently grows their cash hoard. Sometimes really dunno what market is looking forward really - perhaps newflows and excitement that will give thrills but seldom build wealth

(13-03-2012, 05:19 AM)Musicwhiz Wrote: They've been raising money consistently through debt and equity for the last few years. Quite glad I divested myself of Ezra back in late-2009.

Business Times - 13 Mar 2012

Ezra stock hit by share placement move

But some analysts see the counter's pullback as a buying opportunity

By LYNN KAN

EZRA Holdings' placement share plans pushed its shares down yesterday in the week's first trading session, but analysts are advising investors to stock up on the subsea installations player.

The stock plunged nine cents or 7.4 per cent to $1.12 yesterday after it unveiled plans late last Friday to issue 110 million new shares at $1.10 apiece that will raise gross proceeds of $121 million. Ezra intends to use the net proceeds for, among other things, general working capital and/or business opportunities.

CIMB said: 'We see opportunities to accumulate when Ezra's share price pulls back following the placement of 110 million shares.'

The placement plan is dilutive to existing shareholders by 11 per cent. Yet, it also comes with the promise of new contracts to come.

'The proceeds will be used for working capital, as Ezra executes its US$1 billion subsea order backlog,' added CIMB. 'We expect to hear of some contract win in the next two months as its tender book remains strong.'

DNB analyst Kay Lim points out that market fundamentals underpinning the oil and gas industry will be the chief judge of Ezra's share price.

'The market consolidation (Subsea 7-Acergy, SapuraCrest-Clough and Technip-Global Industries) has created a vacuum for another player to step up, as oil companies prefer more choices and competition,' he said.

'Ezra has a place in the subsea market to target the smaller projects in Asia-Pacific. Other key players will be kept occupied by the larger projects in the North Sea, Brazil, and West Africa.'

OCBC, however, raised the red flag that Ezra's actions of late indicate that it is still short of funds.

At end-February, Ezra slashed its stake in Ezion Holdings to 5.61 per cent from 14.02 per cent.

Even after the placement, OCBC estimates that Ezra will still need about US$207 million for its capital needs this year.

'This could be supported by divestment of non-core assets, as well as the debt markets,' said Low Pei Han, who downgraded the stock to 'hold' from 'buy'.

Ezra is in a sexy industry ie oil and gas. Hence, the high profile it enjoys.
And they are trying to transform themselves into global top tier deepsea support firms which are limited to a few players.
How can it not be sexy?
However, such industry requiries huge capital and Ezra is under capitalised. So, i think, the way forward will be
1. merger or bring acquisited by another player
2. to go for maximum fund raising be it debt/pepertual/placement

So, they are going for option 2 from the look of it NOW.

I feel this company is for high risk takers. It can go either way.
But of course, there is always option 1.

(13-03-2012, 02:15 PM)camelking Wrote: Ezra is in a sexy industry ie oil and gas. Hence, the high profile it enjoys.
And they are trying to transform themselves into global top tier deepsea support firms which are limited to a few players.
How can it not be sexy?
However, such industry requiries huge capital and Ezra is under capitalised. So, i think, the way forward will be
1. merger or bring acquisited by another player
2. to go for maximum fund raising be it debt/pepertual/placement

So, they are going for option 2 from the look of it NOW.

I feel this company is for high risk takers. It can go either way.
But of course, there is always option 1.

Agree with you on the "sexy" industry part - O&G is going through a boom now with oil prices hitting highs once again. I can see where Ezra is headed in terms of transformation, but the problem is the never-ending requirement for capex and spending means very little returns by way of profits/dividends actually accrues back to shareholders.

Growing the size of the company and the top-line is one thing, but growing the bottom-line is much, much harder. Given that Ezra is scaling up its fleet and moving into SURF and specialized assets, this must also mean higher operational costs and specialized skill staff (translating into higher opex). Gross margins have also been suffering in the last couple of quarters.

As Kingsmen's CEO once said - it's easy to bid for projects, win them and show a beautiful top-line; but it's much harder to grow the all-important bottom line.

Add to that the fact that Ezra does not generate any FCF, and they paid 5x book value for their most recent acquisition; means that it might be a really long time before shareholders see stable cash flows and decent returns.

Of course, if you are truly a "risk-taker", you can always punt on the share price rising in the short-term, even as you keep an eye on its financial health.

I doubt a merger would be on the cards, so it's fund-raising after fund-raising for Ezra. Debt levels are already pretty high so the next major step may be.....perpetuals?

(13-03-2012, 02:25 PM)Musicwhiz Wrote:

(13-03-2012, 02:15 PM)camelking Wrote: Ezra is in a sexy industry ie oil and gas. Hence, the high profile it enjoys.
And they are trying to transform themselves into global top tier deepsea support firms which are limited to a few players.
How can it not be sexy?
However, such industry requiries huge capital and Ezra is under capitalised. So, i think, the way forward will be
1. merger or bring acquisited by another player
2. to go for maximum fund raising be it debt/pepertual/placement

So, they are going for option 2 from the look of it NOW.

I feel this company is for high risk takers. It can go either way.
But of course, there is always option 1.

Agree with you on the "sexy" industry part - O&G is going through a boom now with oil prices hitting highs once again. I can see where Ezra is headed in terms of transformation, but the problem is the never-ending requirement for capex and spending means very little returns by way of profits/dividends actually accrues back to shareholders.

Growing the size of the company and the top-line is one thing, but growing the bottom-line is much, much harder. Given that Ezra is scaling up its fleet and moving into SURF and specialized assets, this must also mean higher operational costs and specialized skill staff (translating into higher opex). Gross margins have also been suffering in the last couple of quarters.

As Kingsmen's CEO once said - it's easy to bid for projects, win them and show a beautiful top-line; but it's much harder to grow the all-important bottom line.

Add to that the fact that Ezra does not generate any FCF, and they paid 5x book value for their most recent acquisition; means that it might be a really long time before shareholders see stable cash flows and decent returns.

Of course, if you are truly a "risk-taker", you can always punt on the share price rising in the short-term, even as you keep an eye on its financial health.

I doubt a merger would be on the cards, so it's fund-raising after fund-raising for Ezra. Debt levels are already pretty high so the next major step may be.....perpetuals?

FYI, Ezra did try to launch a perpetual at more than 7% late last yr. Mkt was bad then so issue failed. Never rule out another one.

Over expand and too ambitious. Keep raising right issue to pay for the debt, it seem like china s-chip.

No vested.

(13-03-2012, 02:42 PM)greengiraffe Wrote: FYI, Ezra did try to launch a perpetual at more than 7% late last yr. Mkt was bad then so issue failed. Never rule out another one.

They would probably attempt it again, hence my " ". Since the perps will be accounted for as equity rather than debt, it will lower their gearing as it will increase their equity base - an ingenious way of telling the market hey look we have reduced our gearing. Total gross debt remains the same though, they are just tweaking around with the denominator.

Perps act somewhat like preference shares, in that coupons must be paid on perps before ordinary shareholders can receive dividends. It is also similar in the sense that there is a fixed rate of payment. Good thing is that there is no fixed tenure for redemption of the perps, but this also means investors have to be compensated with a higher coupon rate.