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Ezion’s Net Profits Down 36%; But It’s Time To Buy
Aspire | 04 September 2015
By: Raymond Leung
Articles (142) Profile

Analysts' updates of Ezion Holdings Limited as at 04/09/2015

Ezion Limited Holdings 3-month (as at 04/09/2015

Analysts’ eyes were on Ezion after it released weaker-than-expected 2Q15 results. This is a continuation of the weak 1Q15 results as prices of crude brent oil are still in a slump. Despite the poor financial performance of the counter and weak market sentiments circling the offshore marine sector, it might not be doomsday for Ezion, but a buying opportunity.

Another Disappointing Quarter

Source: Revenue of Ezion, MorningStar

Revenue for Ezion remained relatively stable despite falling marginally by 2.8 percent year on year (yoy) to US$90.1 million, as its clients continue to commit to their rental agreements. The real drags for the quarter are the higher cost of sales and finance costs.

Source: Cost of Sales of Ezion, MorningStar

The cost of sales and servicing surged by 29.6 percent yoy to US$58.7 million while the net finance cost increased by 52.8 percent yoy to US$5.8 million. These two factors dragged the net profit down by 36.3 percent yoy to US$29 million from US$45.5 million.

Source: Net Income of Ezion, MorningStar

Cost Overrun: Call It Bad Luck?

The unexpected cost surge caused margin to be crunched from 46.1 percent in 1Q15 to 34.9 percent in 2Q15. The main attribute was due to the cost overrun from the lift boat Sunrise that was deployed in Australia. This unit was contributing an estimated US$10 million per quarter but the figures were offset by the new deliveries. Sunrise will be towed back to Batam, Indonesia for repairs.

In addition to the unexpected downtime from Sunrise, a negative deviation has derived from seven service rigs which will continue through 3Q15. This is a strategic move to improve the assets for longer deployment in the future. The seven rigs are expected to return to operations in 4Q15.

Can Ezion Turnaround In 2H15?
Gradual recovery from 3Q15 can be expected as the new vessels that were delivered in 2Q15 begin its contribution. Six vessels that are currently off-hire for repairs and upgrades will begin contributing to Ezion in 4Q15. Furthermore, shareholders might be able to gain from the stronger USD; the financial statements are calculated in USD.

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

Please click here for more information about this author.


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