HOLD (Maintained) R e g i o n a l ...

R e g i o n a l
M o r n i n g
N o t e s
Monday, 27 October 2014
COMPANY RESULTS
HOLD
(Maintained)
Ezra Holdings (EZRA SP)
4QFY14: Share Price Turnaround Is Contigent On Emas AMC And EOL
4QFY14 results were within our expectation. We cut our FY15-16 earnings forecasts
by 17-34% and lower our target price from S$1.36 to S$0.94. While Ezra is deep in
value, an earnest turnaround in its share price can only come about when Emas
AMC and EOL deliver a clear earnings pick-up. Maintain HOLD. Entry price: S$0.80.
S$0.83
S$0.94
+13.3%
S$1.36)
COMPANY DESCRIPTION
4QFY14 RESULTS
Year to 31 Aug
(US$m)
Revenue
Gross Profit
Operating Profit
Pre-tax Profit
Tax
Minorities
Net Profit
Gross Margin (%)
Op. Margin (%)
Share Price
Target Price
Upside
(Previous TP
4QFY14
445.9
63.3
24.4
16.9
(4.1)
(1.9)
11.0
14.2
5.5
yoy
% chg
+6
(15)
(3)
(22)
(51)
(45)
+10
-3.7ppt
-0.5ppt
FY14
1,488.3
226.9
76.8
74.7
(20.7)
(8.7)
45.3
15.2
5.2
yoy
% chg
+18
+34
(29)
(19)
(27)
(16)
(16)
+1.8ppt
-3.4ppt
Ezra Holdings is an owner-operator of
offshore support and construction vessels. In
1Q11, it completed the strategic acquisition of
deepwater subsea construction company,
Emas AMC.
Remarks on FY14
Subsea revenue +32% yoy
Subsea turned around from a
loss, but OSS and marine
segments posted lower earnings
STOCK DATA
GICS sector
Bloomberg ticker:
Shares issued (m):
Market cap (S$m):
Market cap (US$m):
3-mth avg daily t'over (US$m):
Source: Ezra Holdings Ltd, UOB Kay Hian
RESULTS
• Within our expectation. Net profit was US$11.0m and US$45.3m for 4QFY14 and
FY14 respectively, in line with our net profit forecast of US$45m for FY14.
• Higher revenue due to subsea services. Revenue increased by 18% yoy to S$1.5b in
FY14 due to higher revenue posted by the subsea segment. Subsea revenue increased
to US$1,040b in FY14 from US$797m in FY13. This offset the lower revenues from the
offshore support services (OSS) and marine segments. Revenue from OSS declined
from US$285m to US$260m while marine revenue fell marginally from US$189m to
US$188m. FY14’s lower OSS revenue was due to lower revenue from two leased-in
vessels which were returned to their owner during FY14. In addition, the weakness in the
AHT and shallow-water PSV segments and the transfer of two vessels from the OSS for
use in the subsea segment also contributed to the OSS revenue decline.
• Higher gross profit for FY14. Gross profit increased by 34% to US$227m with gross
margin improving from 13.4% to 15.2%. The subsea turned around from a loss in FY13
which was affected by a one-off cost resulting from delays in the execution of certain
projects, coupled with other unforeseen project costs.
Energy
EZRA SP
978.8
812.4
636.1
2.8
Price Performance (%)
52-week high/low
S$1.48/S$0.735
1mth
3mth
6mth
1yr
YTD
(14.9)
(30.5)
(22.4)
(33.6)
(39.6)
Major Shareholders
%
Lee Chye Tek Lionel
22.7
Aker Solutions
7.4
FY15 NAV/Share (US$)
1.07
FY15 Net Debt/Share (US$)
1.49
PRICE CHART
(lcy)
EZRA HOLDINGS LTD
EZRA HOLDINGS LTD/FSSTI INDEX
(%)
130
1.60
120
1.40
110
100
1.20
90
1.00
KEY FINANCIALS
Year to 31 Aug (US$m)
Net turnover
EBITDA
Operating profit
Net profit (rep./act.)
Net profit (adj.)
EPS (US$ cent)
PE (x)
P/B (x)
EV/EBITDA (x)
Dividend yield (%)
Net margin (%)
Net debt/(cash) to equity (%)
Interest cover (x)
ROE (%)
Consensus net profit
UOBKH/Consensus (x)
2013
1,262
169
109
54
54
5.7
11.4
0.7
13.3
0.6
4.3
101.8
4.4
5.1
-
Source: Ezra Holdings Ltd, Bloomberg, UOB Kay Hian
Refer to last page for important disclosures.
2014
1,488
149
77
45
45
4.6
14.0
0.6
15.1
0.0
3.0
137.2
3.8
4.1
-
2015F
1,830
187
110
43
43
4.4
14.7
0.6
12.0
0.0
2.4
124.4
4.6
3.7
69
0.63
2016F
2,213
234
144
68
68
6.9
9.5
0.6
9.6
0.0
3.1
124.6
5.7
5.6
92
0.74
2017F
2,570
288
193
82
82
8.3
7.9
0.5
7.8
0.0
3.2
119.7
7.0
6.4
-
80
70
0.80
60
0.60
50
40
30
Volume (m)
20
10
0
Oct 13
Dec 13
Feb 14
Apr 14
Jun 14
Aug 14
Source: Bloomberg
ANALYSTS
Nancy Wei
+65 6590 6628
[email protected]
Vijay Natarajan
+65 6590 6626
[email protected]
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R e g i o n a l
M o r n i n g
N o t e s
Monday, 27 October 2014
EZRA’S FY14 REVIEW AND FY PRIORITIES
Source: Ezras
STOCK IMPACT
• Not out of the woods yet, but Ezra is pushing ahead. The secondary listing of Emas
Offshore (EOL) has been completed with EOL acquiring Ezra’s OSS business at
US$520m. Ezra now owns 75% of EOL. With the OSS business now under a separately
listed entity, EOL will focus on reviving the OSS margins as well as growing the OSS
business which had stagnated over the last three years. In addition, EOL will also expand
its own offshore accommodation business.
• The marine segment under Triyards looks forward to a bright outlook. Demand for
liftboats has picked up with Triyards in negotiations for 10-12 liftboat contracts worth
US$500m-600m. The recent earnings-accretive acquisition of Strategic Marine’s yards
will boost Triyards’ yard capacity and expand its product segment and client base.
• However, subsea still needs to achieve a larger orderbook and better margins.
Emas AMC’s subsea orderbook currently stands at US$1.2m, of which 60% will be
recognised in FY15. With the completion of its game-changer vessel Lewek Constellation
in 2Q15, it should enable Emas AMC to achieve a higher orderbook level. However,
margins will depend on project execution. Thus far, Emas AMC’s margins have been
below those of its peers.
EARNINGS REVISION/RISK
• Cutting FY15-16 forecasts. We cut our FY15-16 forecasts by 17-34% on the back of
lower subsea margins and higher minorities (following the listing of EOL). Through EOL,
Ezra now effectively owns 75% of its OSS business which was previously a wholly-owned
business.
VALUATION/RECOMMENDATION
• Maintain HOLD with a lowered target price of S$0.94 which is pegged at 0.7x 2015F
P/B vs 1.0x previously. Our recommended entry price is S$0.80. Ezra is deep in value,
but an earnest turnaround in share price can only come about when Emas AMC and EOL
deliver strong earnings improvement.
SHARE PRICE CATALYSTS
• Clear earnings pick-up at Emas AMC and EOL.
Refer to last page for important disclosures.
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R e g i o n a l
M o r n i n g
N o t e s
PROFIT & LOSS
Year to 31 Aug (US$m)
BALANCE SHEET
2014
2015F
2016F
2017F
1,488
1,830
2,213
2,570.0
149
187
234
287.7
Deprec. & amort.
72
77
90
94.6
EBIT
77
110
144
193.1
Associate contributions
37
28
28
28.0
(39)
(41)
(41)
(41.0)
75
97
131
180.1
(21)
(27)
(37)
(51.1)
LT debt
Minorities
(9)
(27)
(26)
(47.0)
Other LT liabilities
Net profit
45
43
68
82.0
Shareholders' equity
Net profit (adj.)
45
43
68
82.0
Minority interest
Net turnover
EBITDA
Net interest income/(expense)
Pre-tax profit
Tax
Year to 31 Aug (US$m)
2014
2015F
2016F
2017F
1,594
1,667
1,727
1,782.6
559
581
604
625.9
Cash/ST investment
0
150
169
237.8
Other current assets
1,210
1,360
1,525
1,678.1
Total assets
3,363
3,758
4,025
4,324.4
ST debt
510
567
672
776.7
Other current liabilities
574
843
912
978.0
1,040
1,040
1,040
1,040.3
54
54
54
53.7
1,130
1,171
1,238
1,319.7
56
83
109
156.0
3,363
3,758
4,025
4,324.4
2014
2015F
2016F
2017F
Fixed assets
Other LT assets
Total liabilities & equity
CASH FLOW
Year to 31 Aug (US$m)
Monday, 27 October 2014
KEY METRICS
2014
2015F
2016F
2017F
Operating
99
(1)
25
72.1
Pre-tax profit
75
97
131
180.1
EBITDA margin
10.0
10.2
10.6
11.2
Deprec. & amort.
71
77
90
94.6
Pre-tax margin
5.0
5.3
5.9
7.0
(37)
(28)
(28)
(28.0)
Net margin
3.0
2.4
3.1
3.2
Working capital changes
0
0
0
(87.5)
ROA
1.4
1.2
1.7
2.0
Non-cash items
0
(5)
(5)
(5.0)
ROE
4.1
3.7
5.6
6.4
(10)
(142)
(163)
(82.0)
Associates
Other operating cashflows
Year to 31 Aug (%)
Profitability
Investing
(331)
(79)
(109)
(108.6)
Growth
Capex (growth)
(327)
(150)
(150)
(150.0)
Turnover
17.9
23.0
20.9
16.1
Investments
0
0
0
0.0
EBITDA
(11.7)
25.4
25.3
23.0
Proceeds from sale of assets
6
80
50
50.0
Pre-tax profit
(19.1)
29.9
34.8
37.7
Others
(10)
(9)
(9)
(8.6)
Net profit
(15.6)
(5.0)
58.1
20.6
Financing
187
56
104
105.0
Net profit (adj.)
(15.6)
(5.0)
58.1
20.6
(5)
(2)
(2)
0.0
EPS
(18.5)
(4.8)
55.8
20.0
0
0
0
0.0
Dividend payments
Issue of shares
Proceeds from borrowings
404
150
400
400.0
(225)
(93)
(295)
(295.0)
13
0
0
0.0
Net cash inflow (outflow)
(45)
(24)
20
68.5
Beginning cash & cash equivalent
173
174
150
169.3
0
0
0
0.0
129
150
169
237.8
Loan repayment
Others/interest paid
Changes due to forex impact
Ending cash & cash equivalent
Refer to last page for important disclosures.
Leverage
Debt to total capital
56.7
56.2
56.0
55.2
Debt to equity
137.2
137.2
138.3
137.7
Net debt/(cash) to equity
137.2
124.4
124.6
119.7
3.8
4.6
5.7
7.0
Interest cover (x)
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R e g i o n a l
M o r n i n g
N o t e s
Monday, 27 October 2014
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Monday, 27 October 2014
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