Ezion Holdings

[greengiraffe]

Let willing and confident buyers of the bonds bail out the bank...

[greengiraffe]

http://infopub.sgx.com/FileOpen/Ezion_Pr...eID=362286

http://infopub.sgx.com/FileOpen/Form%201...eID=362518

http://infopub.sgx.com/Apps?A=COW_CorpAn...uddies.com

Raised $120m of "low costs" funding then do share buyback... very the can...

Of course insider also gave confidence via open mkt purchase...

Not Vested
Kay Poh Buddy

Let willing and confident buyers of the bonds bail out the bank...

[greengiraffe]

End game in progress... demise of another darling

UOB KH:

Ezion Holdings (EZI SP) BUY
Price/Tgt: S$0.765 / S$1.52 Mkt Cap: US$863.9m 52-wk avg daily value: US$12.7m 1-Yr Hi/Lo: S$1.92/S$0.735

Results Flash: Net profit of US$29m, down 36%
Analysts: Nancy Wei / Foo Zhiwei Tel: (65) 6590 6628/6626

What’s New?
- Ezion reported net profit of US$29m, down 36% yoy. 1H15 was US$70m, down 23% yoy
- Revenue was down marginally at US$90m, down 2.8% from US$93m in 2Q14.
- Gross profit was down 34% on higher costs, at US$31m versus US$47m in 2Q14
- Gross margin was 35% for 2Q15, down 16ppt from 51% in 2Q14.

Our Take
- Net profit came in below expectations; 1H15 results of US$70m was 32% of our full-year forecast of US$218m.
- We reckon the below-expectation results were due to a) the absence of revenue contribution from the tug and barge fleet in Australia (Ezion's aim is to divest this fleet), b) timing difference in revenue recognition in the liftboat/service rig business and c) higher refurbishment costs.
- The large drop in gross margin was mainly due to a 30% increase in costs. One of the factors contributing to the sharp increase in cost of sales was the US$8.8m increase in depreciation charge from US$24m to US$33m as new units were deployed in 2Q15.

Valuation/ Recommendation
- Our current recommendation is a BUY, with target price of S$1.52.
- More details pending an analyst briefing later in the morning. Look out for our results note on Monday.

[CY09]

I notice in many analysts reports for the offshore&gas industry, the analysis of cash flow is ignored. However, for analysis involving some companies like Super Group, cashflow analysis is touched on. It is quite funny that they will overlook the cash generation ability of og companies when cash is the lifeblood of a company and not entirely on its p&l

[greengiraffe]

Company Share Price Rec Target Px Within Expectation Profit yoy Profit qoq Highlight of Results
Ezion Holdings S$0.74 BUY S$1.52 Below -36.3% -29.4% See attached comments.


Ezion Holdings reported net profit of US$29.0m for 2Q15, and US$70.0m for 1H15.

Results was below expectations, at 32% of our FY15 forecast of US$218m. It was also below consensus mean FY15 estimate of US$203m.

Analyst briefing takeaways:

Revenue was marginally lower at US$90.1m, down 2.8% from US$92.6m yoy.

Cost of goods spiked 29.6% from US$45.3m to US$58.7m. Gross margin for 2Q15 fell from 51% to 35% yoy as a result.

The lower earnings was mainly attributable to operational issues which resulted in the spike in costs. The issues are as follows:
1. 7 units undergoing switching over 2Q15-3Q15. 7 out of the 25 service rigs are involved in this inter-changing. This will create gaps in revenue during the period. Switching is necessary for better deployment of service rigs in the long-term as it allocates the appropriate service rig that meets the clients' requirement. This reduces the capex Ezion will incur compared to if it had upgraded the existing units based on clients' request.
2.
2. Loss on Teras Sunrise. Ezion made its first liftboat charter in Australia, chartering the its largest and most advanced liftboat, Teras Sunrise, to an oil major. This is the first liftboat in Australia. Due to union laws in Australia, Ezion was forced to take on Australian crew, whose costs are triple that of International crew. This was in spite of the charter contract allowing for the employment of international crew. Crew costs ballooned as a result. Additionally, the Australians were relatively new to liftboats, and that caused operational setbacks. Ezion is looking to pull back the unit and resolve the situation with the customer before proceeding forward. The costs incurred from this exercise resulted in a loss for the unit. Teras Sunrise is currently estimated to return to work by 4Q15.
3.
3. 75% fleet utilization in 2Q15. Fleet utilization was 75% in 2Q15. Ezion had 6 units that were not operational due to repair, upgrades and drydock inspection. The 6 units exclude Teras Sunrise.
4.
4. Low activities from Australian tug & barge fleet. The Australian unit experienced lower activities in 2Q15 vs its peak in 2Q14. Ezion intends to sell the fleet and is looking for spot jobs in the interim period.
5.
5. Higher expense owing to 3 new units delivered in 2Q15. Ezion took delivery of 3 more units in 2Q15, increasing its fleet from 22 to 25 units from 1Q15 to 2Q15 respectively. The increased depreciation, crew and operationally-related expenses contributed to the higher cost of goods for 2Q15.

Administrative expense rose 12.9% from US$4.3m to US$4.8m as Ezion took on a few more senior headcounts. It is expected to stabilise at this level going forward.

Finance costs was 28.2% higher, from US$5.4m to US$7.0m on additional interest expense from funding of newly delivered service rigs.

Share of associates saw a 16.4% increase from US$7.9m to US$9.3m, due to a better than expected results from one of its associates with POSH.

Regards,

Zhiwei Foo
UOB Kay Hian (Singapore) Pte Ltd
8 Anthony Road, Singapore 229957
Tel: +65 6535 6868
Dir: +65 6590 6626
E-mail: zhiwei@uobkayhian.com

[greengiraffe]

Macquarie:

Not ‘doomsday’ as is being priced in
Event
 Ezion reported S$29m in 2Q15 (vs S$41m in 1Q15), missing our estimates by
30%. The miss was due to the highest costs on new deliveries while they
didn’t contribute to revenues.
 Valuation at 0.6x P/B is pricing in a ‘doomsday’ scenario in our view while its
core business is very firm in a turbulent environment. All of its 37 vessels
are contracted with none being cancelled despite weak oil environment.
Impact
Results’ highlights:
 Revenues flat QoQ but costs increase = profit decline QoQ: Ezion
delivered 3 new vessels in 2Q15 thus increasing its COGS by 36% QoQ,
depreciation by 11% QoQ and interest cost by 21% QoQ.
 Why were revenues flat despite 3 new deliveries?: Firstly, 2 out of the 3
vessels were delivered only in May ’15, thus adding only one month of
revenues. Secondly, Ezion had 7 units which were switched around from one
geography to another – thus resulting in idle time and zero revenues.
 Vessel status – 22 delivered, 15 to go: Out of these 15, 6 will be delivered
from Sep-Dec ’15 according to mgt, while the rest 9 will be delivered in 2016.
 Re-contracting status – 4 out of 5 done: Out of the 5 vessels expiring this
year, 4 have already been re-negotiated and re-contracted. Only 1 is due
which is in the North Sea, for which negotiations are on, according to mgt.
Looking forward:
 Quite remarkable to maintain QoQ revenues despite the movements: We
think Ezion has done extremely well to maintain revenues QoQ. Switching
around of vessels and upgrade jobs at own costs are realities in an oil
downcycle environment in our view, with which Ezion has dealt very well.
 2H15 revenues to improve sequentially with recent and more deliveries:
The 3 recent new deliveries will add ~S$10m/qtr to revenues from 3Q15
according to our analysis. In addition, 6 other vessels will be delivered
sequentially in 2H15 which could add another S$10-15m per quarter.
 1H15 profit at S$70m, 2H15 should be higher: While our and the street’s
2015 profit estimates have downside risk now, we believe 2H15 profits will be
sequentially higher as the recent 3 new vessels and 6 others contribute.
 Biggest positive – NO cancellations: All 37 vessels are still contracted
which implies a steady stream of revenues for the foreseeable future.
Earnings and target price revision
 Our estimates are under review.
Price catalyst
 12-month price target: S$1.50 based on a DCF methodology.
 Catalyst: News on re-contracting of vessels
Action and recommendation
 Even with 30% downside to our estimates, stock is extremely cheap: Even
with 15E profit of S$150-160m, it trades at 5x P/E, and only 0.6x P/B now.

KE:

Liftboat Demand Intact
 2Q15 missed on lower gross margins, with additional costs
from several operational issues. Cut EPS by 17-38% for costs,
deployment delays & allowances for off-hires.
 No contract cancellations. Four of five expiring contracts
renewed.
 Maintain BUY with TP lowered from SGD1.55 to SGD1.35,
now at 1.0x FY16 P/BV from 1.2x. Expect catalysts from
4Q15/1Q16 sequential earnings jump.
What’s New
2Q15 PATMI of USD29.0m (-36.3% YoY, -29.4% QoQ) missed
expectations. 1H15 PATMI of USD70.0m (-22.9% YoY) formed 30/34%
of our/consensus FY15F. 2Q15 gross margins retreated 11.2ppts
QoQ to 34.9%, under: 1) higher crew costs for Unit 24 (Sunrise) in
Australia due to union issues, which Ezion is trying to resolve; 2)
the idling of six units in 2Q15 for repair, upgrades and dry-docking;
and 3) a higher proportion of lower-margin time-charter contracts.
Nineteen liftboats contributed in 2Q15, up from 17 in 1Q15.
What’s Our View
Ezion will inter-switch seven of its liftboats in 2Q-3Q15 for more
efficient deployment and to meet clients’ demands. This will
create contribution gaps, but reduce overall capex and costs that
it may otherwise have to incur. Importantly, there have not been
any contract cancellations. In fact, four of five expiring contracts
have been renewed. Operational vessels are 99% utilised, a
testament to its relative resilience.
We cut FY15-17 EPS by 20-34% for additional costs, deployment
delays and off-hires in FY16-17, to be conservative. Net gearing
could rise to 1.1x by year-end but it has been able to access
funding with a recent SGD120m bond issue at only 3.65%. Despite
our lowered numbers, we forecast that FCF yields could still
approach 12% in FY16. 4Q15/1Q16 sequential earnings jump
possible with eventual deployment of idling units. Maintain BUY, TP
lowered from SGD1.55 to SGD1.35. This is now at 1.0x FY16 P/BV
instead of 1.2x, due to increased bearish sentiment on the sector.

CIMB:

Getting its house in order
Ezion has built up rapidly over the past 2-3 years, amassing an asset base of
over US$2bn. However, this came the cost of its foundations, which may not
be deep enough. We believe that 2Q and FY15 results reflect Ezion getting its
house in order. At 36% of our FY15 forecast, Ezion’s 1H15 core net profit of
US$70m (-23% yoy) was below our expectations and consensus. 2Q15 was
marred by cost overruns and rejigging of its fleet, and we expect the effects to
ripple through 3Q. We shave FY15-17 EPS by 10-29% as we factor in the
earnings miss, tweak our fleet deployment assumptions and temper
Australian contributions. We also lower our margin assumptions as Ezion
shifts to operatorship (inherent executional issues). Maintain Add, with a
lower target price, based on a justified 1.2x CY15 P/BV (instead of a blended
valuation). Catalysts could come from stronger earnings and contract wins.
2Q15 marred by cost overruns and rejigging of fleet
The qoq drop in Ezion’s gross margin from 46.1% in 1Q to 34.9% in 2Q was
mainly due to cost overruns from liftboat Sunrise (deployed in Australia).
Unhinged by crewing, and then mechanical-related issues, we estimate that
Sunrise incurred US$3m-5m losses in 2Q (due to repair provisions). The unit
will be towed back to Batam, Indonesia for repairs in the coming week. It has
contributed 1.5 months of revenue in 3Q and the unit could break even in the
quarter if there are no further major repair expenses. The negative deviation
also sprang from the interchanging of seven service rigs, which will continue
throughout 3Q. This strategic manoeuvre is intended to improve deployment of
assets in the longer term. The rejigging of fleet can be inferred from flat qoq
revenue, which offset the deployment of three additional rigs (refer overleaf for
fleet status). Margins were squeezed by the operating burden carried by the rigs,
which were switched around (no revenue to offset depreciation charges,) as
well as the associated costs of mobilisation and maintenance.
Expect flat 3Q… but jump in FY16 when downtime rigs go
online
If there are no further major repair expenses for Sunrise and no contract
cancellations, we expect c.4% qoq improvement in net profit for 3Q (US$30m).
The improvement would come from full-quarter contributions from service rig
#29 (50% JV with Swissco in the Middle East), liftboat #19 (deployed in Brunei)
and a small contribution from one service rig added in 3Q. As yet, no additional
rigs have been delivered in 3Q. However, these would be offset by the
full-quarter’s downtime for rig #12 (deployed in Myanmar), possible
maintenance for liftboat #3 (deployed in the Middle East) and continued
effects of rejigging the fleet, which we believe will be more substantial vs. 2Q.

[greengiraffe]

All Buys but price still drop... All the consultants salah?

No Vested Interests

DBS:

Could have been better
 2Q15 results below on unexpected vessel downtime and
higher cost incurred for the Australian unit
 Trim FY15/16F earnings by 31/17%
 Look forward to better 2H on resumption of units
currently under repair and upgrades, and new deliveries
 Reiterate BUY; TP lowered to S$1.00
Hit by unexpected loss of income and cost. 2Q15 results
disappointed, falling 36% y-o-y and 29% q-o-q to US$29m. This
brings 1H15 PATMI to US$70m, making up only 34% of consensus
estimate. 2Q15 would have seen sequential improvement on the
back of three rig deliveries in the quarter. However, performance
was dragged down by loss of income for a large vessel taken off
the fleet for repairs. This unit was contributing c.US$10m a quarter
and this had offset the additional income stream from new
deliveries. In addition, there were higher-than-expected expenses
incurred from employing Australian crew for the newly commenced
Australian timecharter unit. The unit was initially planned to be
operated by an international crew which would have incurred lower
costs. Making things worse, the vessel suffered mechanical damage
in its first month of operation. There were provisions made in 2Q,
resulting in c. US$5m increase in COGS. Coupled with higher
depreciation (+US$3m), gross margins fell by 11ppts q-o-q to 35%.
Better 2H. We have cut our FY15/16F earnings by 31/17% to
account for the abovementioned unexpected events, and
adjustment to delivery schedule. We expect some recovery in 3Q15
with full quarter contribution from the new deliveries in 2Q15, and
a stronger 4Q15 with the resumption of six vessels that are
currently off-hire for repairs and upgrades. Potential upside could
come from successful cost pass-through and claims for repair cost
of the Australian unit. There have been no cancellations or rate
reductions made thus far. Nevertheless, customers are demanding
for service rigs with higher performance and specs to save on costs.
As such, Ezion plans to switch 7 service rigs in 2H to minimise capex
requirements for vessel upgrades.
Reiterate BUY; TP revised to S$1.00. Ezion remains one of the
more resilient O&G players. Our TP is lowered to S$1.00, still
pegged at 8x FY15F PE, following the earnings revisions. We believe
Ezion should re-rate closer to our TP as it delivers on earnings in the
coming quarters. Key downside risks would be the further plunge in
oil prices, which would dampen O&G activities and sentiment.

UOB KH:

Ezion Holdings (EZI SP)
2Q15: First-mover Disadvantage In Australia
Results were below expectations on: a) a loss on Teras Sunrise liftboat in Australia,
b) downtime resulting from unit switching, and c) selected delays. Six out of 25 units
did not contribute to 2Q15 earnings. However, contracts remain intact and we expect
earnings to recover in 4Q15. We cut our 2015-17 net profit forecasts by 31%, 15%
and 11% respectively. Maintain BUY. Target price: S$1.40.
2Q15 RESULTS
Year to 31 Dec (US$m) 2Q15 yoy %
chg
1H15 yoy %
chg
2Q15 Remarks
Turnover 90.1 (2.8) 180.2 (3.7) 6 units did not contribute to revenue
Gross Profit 31.4 (33.7) 72.9 (23.0) Higher cost of sales arising from deployment/delivery of
new service rigs. See report comments.
EBIT 25.9 (38.4) 63.7 (25.1) Higher G&A, finance costs
PBT 29.3 (36.5) 70.6 (23.1)
Tax (0.4) (52.4) (0.7) (45.8)
Net Profit 29.0 (36.3) 70.0 (22.9) Would have been flat if not for operational setbacks
Gross Margin (%) 34.9 (16ppt) 40.5 (10ppt) Lower due to higher depreciation from delivery of new
units, loss on Teras Sunrise,
Source: Ezions, UOB Kay Hian
RESULTS
 First-mover disadvantage in Australia. Ezion reported a net profit of US$29m for
2Q15, down 36.3% yoy. 1H15 net profit was US$70.0m, representing 32% of our 2015
forecast of US$218m. Gross margin fell from 51% in 2Q14 to 35% in 2Q15.
 2Q15 soft earnings were due to some unanticipated operational issues: a) Teras
Sunrise - which was expected to go on a short job in Malaysia - ended up in Australia. It
suffered a loss due to higher-than expected crew cost and provision for repair of
equipment damage; and b) Ezion also interchanged among customers some of its service
rigs. This was to better meet new customer requests for upgrades while mitigating
potential capex that could arise from meeting the requests; c) unexpected issues that
dragged from 1Q15 into 2Q15 resulted in several units not contributing to revenue in
2Q15. We elaborate in details on these operational issues below.
Key takeaways from analyst briefing
 7 units undergoing switching over 2Q15-3Q15. Seven of the 25 service rigs are
involved in this inter-changing. This will create gaps in revenue during the period.
Switching is necessary for better deployment of service rigs in the long term as Ezion
allocates the appropriate service rig that meets clients' requirement. This reduces the
capex Ezion would have incurred if it had upgraded the existing units based on clients'
request.

Nomura:

Bad 2Q15 earnings, good ops cash inflows
Global Markets Research
Market should distinguish between disappointing results and distress business valuation
Action: Accumulate Ezion – trades at distressed valuations, in our view
Rating
Remains
Buy
Target price
Reduced from 1.80
SGD 1.55
Closing price
14 August 2015
SGD 0.72
Potential upside
+113.8%
Anchor themes
We expect Ezion's service rigs to benefit from the substitution demand in Southeast Asia and the Middle East for more efficient, cheaper and safer repair and maintenance work on fixed production platforms, in the production phases of shallow water oil & gas fields.
Nomura vs consensus
Our FY15/16F core net profits are 10% below/8% above consensus estimates.
Research analysts
Singapore Capital Goods
Wee Lee Chong - NSL
weelee.chong@nomura.com
+65 6433 6960
Abhishek Nigam - NSL
abhishek.nigam@nomura.com
+65 6433 6969
We retain our Buy on Ezion, but cut our TP by 14% to SGD1.55. Despite resilient day rates for service rigs, Ezion has surely disappointed with core net profit down 23% y-y in 1H15, due to: 1) vessel delivery delays; 2) unfortunate service rig accidents and 3) demand collapse for tugs/barges in Australia. Still, we see the 62% share price dip from the peak of end-3Q14 as excessive. Ezion still generates healthy operating cash inflows, with USD149mn in 1H15, and it is on track to turn free cash flow positive in FY16F. Even if the market is to assume further delays to the guidance for a net addition of 10 units h-h in 2H15F (with secured contracts), vs its 19 operational service rigs at end-2Q15, the likely FY16F P/E is in the undemanding range of 3-5x (FY15/16F EPS: USD0.10/0.16) and 0.5-0.6x P/B (FY15/16F BVPS: USD0.9/1.0).
2Q15 results disappoint, due to unexpected Teras Sunrise surprise
1H15 net profit of USD70mn equals 37% of our previous FY15F estimate. This is due to a below-consensus 2Q15, as net profit (-36% y-y) was hit by one-off total ship repair costs that are northwards of USD4mn, including Teras Sunrise’s USD3-5mn cost to repair the parts damaged during operation. This unit is the highest spec service rig in Ezion’s fleet, with offshore installation capabilities. Deployed in Australia in mid-2Q15, it also suffered unexpected operational losses due to the unscheduled use of unionised and highly paid Australian workers. Ezion is now negotiating for potentially higher day rates.
FY15-17F net profit cut on higher costs, continued loss at Teras Sunrise
We cut FY15/16/17F net profits by 14%/11%/7%, to reflect: 1) The assumption of recurring losses for Teras Sunrise from 2Q15F, until Ezion has officially resolved the higher-than-contracted operating cost issues. Management is cautiously optimistic about a successful resolution of this contract with the oil major. 2) The charging of vessel repair costs that are expensed off, vs the capitalising of ongoing upgrading costs. 3) The delay of two newbuild deliveries into 2016F, vs the latest guidance of six units returning from dry dockings plus six new deliveries in 2H15F. 4) The removal of two operational units for dry docking in later 2015F or early-2016F.

OCBC also maintain BUY:

Can't cut and paste

Macquarie:

Not ‘doomsday’ as is being priced in
Event
 Ezion reported S$29m in 2Q15 (vs S$41m in 1Q15), missing our estimates by
30%. The miss was due to the highest costs on new deliveries while they
didn’t contribute to revenues.
 Valuation at 0.6x P/B is pricing in a ‘doomsday’ scenario in our view while its
core business is very firm in a turbulent environment. All of its 37 vessels
are contracted with none being cancelled despite weak oil environment.
Impact
Results’ highlights:
 Revenues flat QoQ but costs increase = profit decline QoQ: Ezion
delivered 3 new vessels in 2Q15 thus increasing its COGS by 36% QoQ,
depreciation by 11% QoQ and interest cost by 21% QoQ.
 Why were revenues flat despite 3 new deliveries?: Firstly, 2 out of the 3
vessels were delivered only in May ’15, thus adding only one month of
revenues. Secondly, Ezion had 7 units which were switched around from one
geography to another – thus resulting in idle time and zero revenues.
 Vessel status – 22 delivered, 15 to go: Out of these 15, 6 will be delivered
from Sep-Dec ’15 according to mgt, while the rest 9 will be delivered in 2016.
 Re-contracting status – 4 out of 5 done: Out of the 5 vessels expiring this
year, 4 have already been re-negotiated and re-contracted. Only 1 is due
which is in the North Sea, for which negotiations are on, according to mgt.
Looking forward:
 Quite remarkable to maintain QoQ revenues despite the movements: We
think Ezion has done extremely well to maintain revenues QoQ. Switching
around of vessels and upgrade jobs at own costs are realities in an oil
downcycle environment in our view, with which Ezion has dealt very well.
 2H15 revenues to improve sequentially with recent and more deliveries:
The 3 recent new deliveries will add ~S$10m/qtr to revenues from 3Q15
according to our analysis. In addition, 6 other vessels will be delivered
sequentially in 2H15 which could add another S$10-15m per quarter.
 1H15 profit at S$70m, 2H15 should be higher: While our and the street’s
2015 profit estimates have downside risk now, we believe 2H15 profits will be
sequentially higher as the recent 3 new vessels and 6 others contribute.
 Biggest positive – NO cancellations: All 37 vessels are still contracted
which implies a steady stream of revenues for the foreseeable future.
Earnings and target price revision
 Our estimates are under review.
Price catalyst
 12-month price target: S$1.50 based on a DCF methodology.
 Catalyst: News on re-contracting of vessels
Action and recommendation
 Even with 30% downside to our estimates, stock is extremely cheap: Even
with 15E profit of S$150-160m, it trades at 5x P/E, and only 0.6x P/B now.

KE:

Liftboat Demand Intact
 2Q15 missed on lower gross margins, with additional costs
from several operational issues. Cut EPS by 17-38% for costs,
deployment delays & allowances for off-hires.
 No contract cancellations. Four of five expiring contracts
renewed.
 Maintain BUY with TP lowered from SGD1.55 to SGD1.35,
now at 1.0x FY16 P/BV from 1.2x. Expect catalysts from
4Q15/1Q16 sequential earnings jump.
What’s New
2Q15 PATMI of USD29.0m (-36.3% YoY, -29.4% QoQ) missed
expectations. 1H15 PATMI of USD70.0m (-22.9% YoY) formed 30/34%
of our/consensus FY15F. 2Q15 gross margins retreated 11.2ppts
QoQ to 34.9%, under: 1) higher crew costs for Unit 24 (Sunrise) in
Australia due to union issues, which Ezion is trying to resolve; 2)
the idling of six units in 2Q15 for repair, upgrades and dry-docking;
and 3) a higher proportion of lower-margin time-charter contracts.
Nineteen liftboats contributed in 2Q15, up from 17 in 1Q15.
What’s Our View
Ezion will inter-switch seven of its liftboats in 2Q-3Q15 for more
efficient deployment and to meet clients’ demands. This will
create contribution gaps, but reduce overall capex and costs that
it may otherwise have to incur. Importantly, there have not been
any contract cancellations. In fact, four of five expiring contracts
have been renewed. Operational vessels are 99% utilised, a
testament to its relative resilience.
We cut FY15-17 EPS by 20-34% for additional costs, deployment
delays and off-hires in FY16-17, to be conservative. Net gearing
could rise to 1.1x by year-end but it has been able to access
funding with a recent SGD120m bond issue at only 3.65%. Despite
our lowered numbers, we forecast that FCF yields could still
approach 12% in FY16. 4Q15/1Q16 sequential earnings jump
possible with eventual deployment of idling units. Maintain BUY, TP
lowered from SGD1.55 to SGD1.35. This is now at 1.0x FY16 P/BV
instead of 1.2x, due to increased bearish sentiment on the sector.

CIMB:

Getting its house in order
Ezion has built up rapidly over the past 2-3 years, amassing an asset base of
over US$2bn. However, this came the cost of its foundations, which may not
be deep enough. We believe that 2Q and FY15 results reflect Ezion getting its
house in order. At 36% of our FY15 forecast, Ezion’s 1H15 core net profit of
US$70m (-23% yoy) was below our expectations and consensus. 2Q15 was
marred by cost overruns and rejigging of its fleet, and we expect the effects to
ripple through 3Q. We shave FY15-17 EPS by 10-29% as we factor in the
earnings miss, tweak our fleet deployment assumptions and temper
Australian contributions. We also lower our margin assumptions as Ezion
shifts to operatorship (inherent executional issues). Maintain Add, with a
lower target price, based on a justified 1.2x CY15 P/BV (instead of a blended
valuation). Catalysts could come from stronger earnings and contract wins.
2Q15 marred by cost overruns and rejigging of fleet
The qoq drop in Ezion’s gross margin from 46.1% in 1Q to 34.9% in 2Q was
mainly due to cost overruns from liftboat Sunrise (deployed in Australia).
Unhinged by crewing, and then mechanical-related issues, we estimate that
Sunrise incurred US$3m-5m losses in 2Q (due to repair provisions). The unit
will be towed back to Batam, Indonesia for repairs in the coming week. It has
contributed 1.5 months of revenue in 3Q and the unit could break even in the
quarter if there are no further major repair expenses. The negative deviation
also sprang from the interchanging of seven service rigs, which will continue
throughout 3Q. This strategic manoeuvre is intended to improve deployment of
assets in the longer term. The rejigging of fleet can be inferred from flat qoq
revenue, which offset the deployment of three additional rigs (refer overleaf for
fleet status). Margins were squeezed by the operating burden carried by the rigs,
which were switched around (no revenue to offset depreciation charges,) as
well as the associated costs of mobilisation and maintenance.
Expect flat 3Q… but jump in FY16 when downtime rigs go
online
If there are no further major repair expenses for Sunrise and no contract
cancellations, we expect c.4% qoq improvement in net profit for 3Q (US$30m).
The improvement would come from full-quarter contributions from service rig
#29 (50% JV with Swissco in the Middle East), liftboat #19 (deployed in Brunei)
and a small contribution from one service rig added in 3Q. As yet, no additional
rigs have been delivered in 3Q. However, these would be offset by the
full-quarter’s downtime for rig #12 (deployed in Myanmar), possible
maintenance for liftboat #3 (deployed in the Middle East) and continued
effects of rejigging the fleet, which we believe will be more substantial vs. 2Q.

[sgpunter]

Back in May 2014, Hong Leong Malaysia/Quek Leng Chan purchased 100m shares at $1.94...paper loss of $128m in slightly over a year...ouch...

[greengiraffe]

This is the next dying darling...

[GPD]

All Buys but price still drop... All the consultants salah?

Good time analysts re-iterate buy to boost paper gain.
Bad time analysts re-iterate buy to reduce paper loss.