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Breakdown: Ezion’s Party Just Getting Started
Breakdown, Tradeable | 27 February 2013
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By: Amruth
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By: Simeon Ang
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So, the party seems to have started for Ezion Holdings. Were you able to catch the initial wave? From the chart below, we can see Ezion’s almost meteoric rise from penny stock to probably a blue chip contender.

Source: FactSet, graph on Ezion’s share price for 1 year

The latest bump came about with the release of its financial report card. In it, Ezion reported an almost doubling of its revenue for 4Q12 to US$52.3 million from 4Q11’s US$27.3 million. Ezion’s bottom line figure also pointed to an almost identical surge of 95.7 percent to US$20.5 million from US$10.5 million. However, due to a higher increase in cost of sales and servicing, gross profits increased by a narrower margin of around 63.6 percent.

To add more colour to these result figures as well as paint a bigger picture for current and prospective shareholders, analysts have tried to break down these numbers. We look into a selected few below.

Low Pei Han and Chia Jiun Yang of OCBC Research pointed out that contributions to Ezion’s top line performance mainly came from additional assets and the Queensland Curtis Liquefied Natural Gas (LNG) project.

“We understand that QC (Queensland Curtis) LNG project accounted for about 14 percent of 4Q12’s revenue.”

With Australia proving to be a hotbed for LNG projects, Ezion seems poised to clinch a number of them due to the “still buoyant outlook”.

Pei Han and Jiun Yang’s Call: BUY, with target price of $2.33 (potential upside of 17.7 percent*)

Yeak Chee Keong of Maybank Kim Eng mentioned that,

“Overall, this set of results is more of a non-event…. (However) Some of its projects will be delayed but some has been brought forward… the (Gladstone) LNG  is delayed till April while the (Australia Pacific) LNG project is expected to start earlier.”

The change in schedule may ultimately delay some income coming in for FY13. But in the greater picture of things, it would appear the bringing forward of other projects will undoubtedly cushion this effect.

Chee Keong’s Call: BUY, with target price of $2.26 (potential upside of 14.1 percent*)

Drawing attention to Ezion’s cash flow from liftboat assets, Jason Saw of OSK Research thinks that the current stock price of Ezion is undervalued. He goes on to say,

“… the current stock price is pricing in extension of existing charter (contracts) but not more liftboats and service rigs. We see upside catalysts from new charter contracts and EPS (earnings per share) upgrades.”

Essentially, Jason is trying to make a point that the current market price does not take into account growth in one of Ezion’s main sector, that is, liftboats and service rigs. In his scenario, growth in that sector could push Ezion’s fair value to around $2.52 per share.

Jason’s Call: BUY, with target price of $2.16 (potential upside of 9.1 percent*)

On Ezion’s prospects in the near term, Jeremy Thia of DBS Vickers notes that,

“… management continues to note a robust project pipeline in 2013. We believe Ezion still has the ability to fund new projects through various avenues like internal resources, capital recycling…” etc etc.

Despite increased interest costs that these kinds of borrowings may incur, Jeremy continues to like the counter because of its high earnings visibility.

Jeremy’s Call: BUY, with target price of $2.40 (potential upside of 21.2 percent*)

With such a rosy picture being painted by analysts, could the stock be headed for an extended bull run? Perhaps of note, the other two LNG projects down under, namely the Gorgon and Australia Pacific LNG project which have been forecasted to require around A$52 billion and A$20 billion in investments respectively.

More contract wins from these two projects will definitely serve as important catalysts for further price appreciation of Ezion’s stock.

*Based on Ezion’s closing price of $1.98 on 26 February 2013.

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Ezion Hldgs  -- -- --   
Business: Co develops, owns, and charters offshore assets to support the offshore energy markets. [FY17 Turnover] Liftboats (49.7%), Jack-up Rigs (39.5%), Offshore Support Logistic Services (10.8%).

Insight: Aug-18, 1H18, Co returned to the black with a net ... Read More

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