Ezra Holdings - OCBC Research 2015-10-26: Seeking a more asset-light approach

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EZRA HOLDINGS LIMITED 5DN.SI 

Ezra Holdings: Seeking a more asset-light approach 

 Another soft quarter
 Still in restructuring mode
 Maintain HOLD

4QFY15 net loss of US$7.8m 

• Ezra Holdings reported a 22% YoY rise in revenue to US$147.4m but saw a net loss of US$7.8m in 4QFY15, compared to a net profit of US$11.0m in 4FY14. As Ezra will be selling its 50% stake in its subsea business to Chiyoda, certain subsidiaries and associated companies related to the subsea division have been classified as discontinued operations. 
• In 4QFY15, net loss from discontinued operations was US$16.7m vs net profit of US$18.2m in 4QFY14, while net profit from continuing operations was US$8.9m vs net loss of US$7.1m in 4QFY14. 

Subsea still the underperformer… 

• In FY15, the offshore support and production services segment turned in operating profit of US$37.7m, compared to US$14.7m from the marine division and operating loss of US$15.5m from the subsea services segment. This compares to US$31.6m from the offshore support and production services segment, US$22.5m from the marine division and US$47.4m operating profit from the subsea segment in FY14. 

… but looking forward to strategic partnership 

• This set of results was again below expectations, but the group looks forward to a brighter future for its subsea division given its partnership with Chiyoda (subsea transaction to be completed by end 2015). More specifically, it seeks to leverage synergies with Chiyoda to competitively bid for larger and more complex tenders.

Still expecting more initiatives 

• On the balance sheet front, net gearing has dropped from 1.2x in FY14 to 0.8x in FY15, and we expect the group to further deleverage as it seeks a more asset-light approach in its strategy. 
• In our view, the group is still in a restructuring mode, given that 
  1. there are still plans to divest its FPSO business, 
  2. it is still exploring sale and leaseback of Lewek Constellation, and 
  3. more cost-cutting may be required during this tough operating environment. 
• Maintain HOLD with S$0.16 fair value estimate.

Low Pei Han OCBC Securities | http://www.ocbcresearch.com/ 2015-10-26

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.16 Same 0.16