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Choppiness At Sea: NOL & Ezion
Tradeable, Tradeable Ideas | 15 August 2013
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By: Raymond Leung
Articles (142) Profile

Tradeable Ideas is a new weekly column by Tradeable. This column focuses on locally listed companies or particular sectors that have attracted strong interest from analysts at various research houses. Tradeable Ideas is meant to serve as a springboard for investors’ interest in specific stocks or sectors in Singapore.

Last week, Neptune Orient Lines (NOL) and Ezion Holdings (Ezion) released their latest financials. The results were eye popping for the analysts as the companies steered away from their expectations. At the same time, signals from Collin Seow this week show that Yangzijiang could present a technical opportunity for investors. Have the volatility at sea brought us trading opportunities?

Last week, NOL released its financial results for 1H13. As expected, the group’s revenue for the quarter continued to slide due to weaker freight rates. Revenue for the first half of 2013 slipped by 6 percent as freight rates for major trade lanes slid with Asia-Europe (-55 percent) and Asia-US West Coast (-15 percent). However, profit for the half came in positive at US$41 million, driven by the sale of NOL’s building in Singapore.

Looking at the 2Q13, NOL incurred a loss of US$35 million but was a marked improvement of 71 percent of 2Q12. The improvement was largely due to cost saving initiatives by the company’s management. Analysts from the street was surprised by the extent of impact from these initiatives. General market conditions and freight rates are expected to continue to deteriorate beyond 2Q13, with few signs of a quick recovery as the industry approaches its cyclical trough.

Calls from MacQuarie Research remains hopeful of the company giving it a “Buy” with “Outperform” and a 12-month target price of $1.35 that gives it a potential 8.09 percent growth.

Source: FactSet, NOL 1-Month Chart

On the same day as NOL, Ezion also announced its financial results for the first half of the year. In 1H13, Ezion managed to perform better and beat consensus estimates. Driven by higher revenue (approximately +80 percent for 1H13 & 2Q13), profit for 1H13 surged by 95.2 percent while 2Q13 increased 28.8 percent when compared against the same periods a year ago. The higher profit was also attributed to better than expected profit margins.

Year-To-Date (YTD), Ezion secured seven new lifeboat/service rig contracts (worth US$601 million) that have brought the gearing ratio of the company to 1.01x. In order to receive more contracts, Ezion is likely to need more funding. When asked about future funding, the company’s management said it will likely refrain from raising funds through share issuances, but would explore various debt instruments. Ezion is expected to win another two to three contracts for the remainder of the year.

According to research reports from Maybank Kim Eng Research, the FY13-15F net profit forecasts are being reduced by 1-3 percent as they adjust for revised contribution schedules, lowered revenue but higher gross margins. Calls from the street remain bullish as four houses gave Ezion a “Buy” rating with an average potential upside of 23.88 percent.

Source: FactSet, Ezion 1-Month Chart


Source: Collin Seow’s CSI Trading System, Yangzijiang Daily Chart

Daily Chart of Yangzijiang

The above chart for Yangzijiang is selected for long (BUY).

The 3rd buy arrow was on 12/8/13.

The peak (Resistance) is at $0.945 and the trough (Support) is at $0.91.

To learn more about the CSI Trading system, please click here.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

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
Yangzijiang Shipbuilding (Hldgs)  1.080 -0.040 -3.57%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More

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