Ezra Holdings - OCBC Investment Research 2015-10-01: Outlook still hazy

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EZRA HOLDINGS LIMITED 5DN.SI 

Ezra Holdings: Outlook still hazy 

 Forward agreement between Akastor and DNB 

 Still looking for S/L for Lewek Constellation 

 Maintain HOLD 

Akastor’s subsidiary and DNB enter into forward agreement 

• There was some interest in the market when it was revealed on Monday that Norwegian-based DNB Bank had acquired 207m shares in Ezra via an off-market deal for S$24.84m on 25 Sep 2015, translating to a price of S$0.12/share. 
• DNB originally did not have any shares in Ezra, but now holds a 7.04% stake, becoming the next largest shareholder after Mr. Lionel Lee, Ezra’s CEO. 
• On Tuesday, it was revealed that DNB and Frontica Global Employment (a unit of Akastor AS) had executed a forward agreement, giving Frontica the right to buy 207m Ezra shares at a forward price on a specified settlement date. Having scarce details of the agreement, we do not dismiss the possibility that Frontica actually has the obligation (rather than right) to buy the shares in the future, should this be a form of share pledge agreement for financing. 
• Recall that Ezra had acquired Aker Marine Contractors from Aker Solutions in 2011, following which Aker Solutions had a stake in Ezra due to a cashstock-bond consideration. 
• Last year, Aker Solutions split into two companies- a “new Aker Solutions” and “Akastor”. 

Still exploring sale/leaseback of Lewek Constellation 

• It was also recently announced that Ezra has entered into a binding share sale and subscription agreement with Chiyoda after the earlier binding MOU in relation to the subsea business. In the agreement, it appears that there are still plans for a sale and leaseback of the Lewek Constellation, on terms and conditions acceptable to both parties. The vessel is now mobilized to lay the pipeline and umbilicals on the Noble Energy-operated Gunflint development project. 

Maintain HOLD 

• After rising about 15% since the announcement of the proposed sale of a stake in the subsea business to Chiyoda, Ezra’s share price has trended slightly downwards since its recent peak of S$0.132. 
• Given the dim industry outlook and that there a few positive catalysts in sight, we maintain our HOLD rating and S$0.16 fair value estimate on the stock. 

Low Pei Han OCBC Securities | http://www.ocbcresearch.com/ 2015-10-01

OCBC Securities Analyst Report HOLD Maintain HOLD 0.16 Same 0.16