Ezra Holdings Ltd: Stable 3Q09 despite stormy environment

Stable 3Q09. Ezra Holdings (Ezra) reported topline growth of 9% YoY to US$59.9m while core bottomline also inched ahead 8% YoY to US$18.8m. On a 9M09 basis, core PATMI (excluding 3Q08 US$136.3m divestment) did better, rising 33% to US$43m. On the whole, Ezra met our expectations and we think that this is a credible performance in view of the overall difficult operating environment.

Lift boats from Ezion gives flexibility. Ezion will be delivering two first-in-class multi purpose self propelled jack up rigs (liftboats) to Ezra from Oct 09 to Mar 10. It will be going into Ezra's Energy Division. We understand that the liftboats are able to substitute the use of 2-3 vessels when providing well intervention services and maintenance of offshore platforms. We expect the liftboats to give Ezra greater deployment flexibility with its current fleet, potentially requiring less in-chartering of vessels on spot rates, which in turn stabilises its gross margin.

Pre-emptive S$89.6m. We understand that Ezra has no concrete plans for the proceeds from the 21 May 09 fund raising exercise. Long-term financing has been secured for its previous capex plans and we think the cash will go towards growing the company through other avenues. With the three divisions growing well, we opine that it would take the route to increase efficiencies intra-group prior to taking a risk with external opportunities at this juncture. With credit markets still frozen, we think that the funds could also be used to participate in future bond/equity raising exercises by other companies that are unable to pay/refinance its debt.

EOC still draggy. EOC's Lewek Arunothai failed to meet our expectations of starting earnings accretion in May 09. We understand that the FPSO has now achieved adequate gas "export pressure" and have formally requested to start billing. We have pushed the FPSO contribution back to start in Jul 09. For EOC's pursuance to provide an FPSO for the Chim Sao field, we view "no news as good news", meaning that it is still in the front running for the project.

Maintain BUY. Ezra remains one of our favourites for the sector with its relatively defensive earnings. In addition, we think its recent placement puts it in good stead to capitalise on any distressed asset situation. We have tweaked our SOTP to S$1.46 (prev. S$1.42) as we see margin improvements for the group as it drives for internal efficiency.

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