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

Ezion Holdings - OCBC Investment 2016-07-04: Undertakes Rights Issue; Chinese Windfarm JV Setup EZION HOLDINGS LIMITED 5ME.SI 


  • Underwritten rights issue
  • Net proceeds at least S$135m
  • Sees growth in Chinese windfarm market

Underwritten rights issue at S$0.29/share; min. S$135m net proceeds

  • 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.

Personal commitment by CEO

  • 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.

Marks formal entry into the Chinese offshore windfarm market

  • 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