EZRA HOLDINGS LIMITED
5DN.SI
Ezra Holdings - Struggling to stay afloat
- Core net losses of US$33m in 2QFY16 larger than expected
- OSV segment the key underperformer on the back of a sharp drop in revenues
- Sale of stake in FPSO Lewek EMAS announced
2Q16 results below expectations, largely due to poor performance from the OSV segment.
- 2Q16 saw Ezra report a kitchen-sinking net loss (after MI) of US$250m, dragged down by one-off loss items amounting to around US$217m.
- Core net losses came in worse than projected at US$33m, as the OSV segment saw its core net losses intensify to US$21m this quarter on the back of a sharp drop in utilisation rates to 51% and lower day rates.
- Meanwhile the subsea segment’s orderbook poses downside risk, as it has dropped to low levels of ~US$400m and provides almost no visibility into FY17.
- Triyards remains the bright spot, as it has managed to maintain healthy margins and an orderbook size of over US$500m.
Sale of stake in FPSO Lewek EMAS in the works.
- Owing to the impact of significant impairments and writedowns, especially in the OSV division, Ezra’s net gearing has jumped to 1.15x from 0.8x at end-FY15.
- Ezra and its subsidiary EMAS Offshore have now entered into a binding letter of intent to sell their combined 78.4% interest in PV Keez Pte Ltd, which owns the FPSO Lewek EMAS, to a global infrastructure investment firm.
- We think this could fetch the Ezra Group around US$150m, which will help provide some support to its balance sheet.
Widening loss estimates further.
- We now expect higher net losses of US$115m/US$93m in FY16/17 as we factor in lower profitability at the OSV division – EMAS Offshore.
Valuation:
- Overall, we believe this set of results does nothing to inspire confidence in the stock. However, impact on share price may not be severe as valuations are already quite depressed.
- We are maintaining our HOLD call on the stock with TP of S$0.11 based on a SOTP methodology.
Key Risks to Our View:
- A clutch of subsea order wins in the near term could provide unexpected positive catalysts for the stock.
- Alternatively, if oil prices jump sharply beyond US$50/bbl levels, we could see its share price moving upwards in tandem.
Suvro SARKAR
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2016-04-15
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