Ezra Holdings - DBS Research 2016-01-18: Expect no respite from losses

Ezra Holdings - DBS Research 2016-01-18: Expect no respite from losses EZRA HOLDINGS LIMITED 5DN.SI 

Ezra Holdings - Expect no respite from losses 

Subsea losses intensify. 

  • Ezra reported a net loss of US$55.3m for 1QFY16, much steeper than expected, even after adjusting for a US$13.9m hedging loss. 
  • The subsea division alone posted larger-than-expected losses of US$36.7m in 1QFY16, more than double its US$16.7m loss in 4QFY15. 
  • Utilisation of the subsea fleet was poor – below 50% – amidst a lack of jobs in the market as low oil prices take their toll. 
  • Management expects the subsequent 12-18 months to remain challenging. 

OSV division also loss-making; Triyards holding the fort for now. 

  • Ezra’s OSV subsidiary EMAS Offshore recorded net losses of US$3.2m in 1QFY16, a steep decline compared to a US$10.9m core net profit in 1QFY15. 
  • Utilisation and day rates continued on their downward slide, with total fleet utilisation at 67%, and AHTS vessels now earning US$1.10-1.30/bhp (down from the US$1.80/bhp levels seen in 2014). 
  • Further downside in day rates seems likely from hereon even if utilisation is maintained. 
  • Triyards remains the bright spot amidst the gloom, as it has managed to secure various non O&G-related orders of late. 

Loss projections widened. 

  • We are now projecting core net loss of around US$98m in FY16 and US$68m in FY17, higher than our previous net loss estimates of US$20-24m. 


  • Our sum-of-the-parts target price is reduced to S$0.08 as we lower our P/BV valuation peg for the subsea business to account for weak outlook. 
  • Ezra’s valuations look very depressed at the moment but given the weak oil price outlook, potential heavy losses, and vulnerability to interest rate hikes, we do not see any investment merit for the stock. 
  • Downgrade to Hold. 

Key Risks to Our View: 

  • A clutch of subsea order wins in the near term could provide unexpected positive catalysts for the stock. 
  • EMAS AMC has bid for projects in the Middle East and West Africa regions, and the outcome could be known over the next 2-3 months. 

Suvro SARKAR DBS Vickers | http://www.dbsvickers.com/ 2016-01-18
DBS Vickers SGX Stock Analyst Report HOLD Downgrade BUY 0.08 Down 0.30