Ezra Holdings Ltd: On track for growth in FY09

2Q09 meets expectations. Ezra Holdings (Ezra) reported a 30% YoY rise in topline to US$63m and a 21% YoY increase in bottomline to US$14.9m. However, on a QoQ basis, most of Ezra's divisions registered flattish or decline in revenue contribution, partially due to lumpiness of its revenue. For its main offshore support division, this quarter was flat QoQ as no new vessels were delivered. The group's Marine Division and Energy Division registered 45% and 84% QoQ fall in revenue respectively due to the lumpy nature of revenues. However, as a group, this year will still see bottomline growth. As mentioned in our previous report, forex swings were minimal in this quarter.

Firm charter rates. Ezra announced new/extension of contracts for three of its vessels with rates holding firm. This implies that Ezra's young and deepwater capable assets have a stickiness in its rates unlike older and/or shallow water assets (vessels with BHP < 5000). Currently, only three of Ezra's 30 vessels are 5000BHP but these were built on the basis of very long, fixed rates, time charter projects ranging from 3 to 20 years. Theindustry's current dips in Anchor Handling Tug Supply (AHTS) vessel rates should leave Ezra largely unscathed.

Marine and Energy Divisions. The Marine Division has US$145m in order book to be recognised over the next two years. This division will start to drive synergies within the group as it builds up its repair and maintenance services as well as design and engineering capabilities. Ezra's fledgling Energy Division will not see the same quantum registered in 1H09 as it embarks on smaller projects for 2H09. However, FY10 will see more excitement for this division as it takes deliveries of two self-propelled jack-ups. These will be deployed in high wind or rough sea conditions where even Dynamically Positioned vessels find it difficult to operate.

EOC updates. EOC's net profit of US$10.1m for 1H09 missed our estimates by 12%. Management indicated that this quarter is not a good reflection of EOC's performance due to the mandatory dry docking of one of its vessels and the transition between projects. Its FPSO should also be coming online in May as forecasted.

Maintain BUY. Ezra remains one of our favourites for the mid cap Oil & Gas sector for its earnings resilience despite industry difficulties. Our fair value is tweaked slightly to S$1.00 (prev. S$1.01) as we refine our model.

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