Ezion Holdings - OCBC Investment 2016-07-04: Undertakes Rights Issue; Chinese Windfarm JV Setup

EZION HOLDINGS LIMITED 5ME.SI

Ezion Holdings - UNDERTAKES RIGHTS ISSUE; CHINESE WINDFARM JV SET UP

Ezion Holdings has proposed a renounceable underwritten rights issue of up to 487.3m new shares at an issue price of S$0.29 (~44% discount to closing price of S$0.52 on 30 Jun); this on the basis of three rights shares for every 10 existing ordinary shares.

Under a “Maximum Subscription scenario”, the rights issue will raise S$137.5m in net proceeds; under a “Minimum Subscription scenario”, it will raise S$135.0m in net proceeds. 70% of the proceeds are earmarked for the potential acquisition of new offshore & marine assets, as well as the potential upgrading and modification of existing assets; the rest is for general working capital.

Mr. Chew (CEO of Ezion) and his spouse will subscribe and pay for 43.34m rights shares entitlements and up to a certain number of excess rights shares (subject to availability), provided that the total value is up to S$50m, representing about 35.38% of the total rights share to be issued.
Currently, Mr. Chew has a 14.1% stake in Ezion.

In a separate announcement, Ezion also announced that it has established Sinomarine & Teras (Tianjin) Offshore Co, a JV with Sinotrans & CSC Holdings which marks the formal entry of Ezion into the Chinese offshore windfarm market.
Do note that Ezion’s shares will trade ex-rights from 9am on 7 Jul and the theoretical ex-rights price is S$0.467/share (based on closing price of S$0.52 on 30 Jun).
The operating environment for the offshore oil and gas industry remains tough and time will still be needed for Ezion to diversify away from it.
Given the protracted period of time required for recovery, we lower our P/B from 0.45x to 0.4x and at the same time roll over our valuations to FY16/17F book, such that our fair value estimate drops from S$0.55 to S$0.50.
Following the rights issue, we estimate that our fair value will drop to S$0.42. Maintain HOLD.

Low Pei Han CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-07-04

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.50 Down 0.55