OCBC Report 13 Jan 14

13 Jan 2014

KEY IDEA Ezra Holdings: Continued operational improvement in subsea business Summary: Ezra Holdings’ 1QFY14 revenue grew 21.9% YoY to US$339.8m but PATMI declined 6.1% to US$6.3m. However, if we strip out exceptional items, we estimate core PATMI to come in at US$6.7m, or a 57.2% YoY jump. This formed ~20% of our FY14 core PATMI forecast, which we view as in-line with our expectations. Ezra’s Subsea Services division was its main revenue driver for 1QFY14, and management remains upbeat on prospects for this business in FY14 and FY15. Ezra’s net orderbook was >US$2b as at 30 Nov 2013, of which 50-65% belongs to its Subsea Services division. In our view, as Ezra is trading at an unexciting FY14F core PER of 30x, we maintain our SELL rating on the stock, but with a slightly higher fair value estimate of S$1.03 (previously S$0.99) as we raise our USD/SGD assumption from 1.23 to 1.27. (Low Pei Han and Andy Wong)

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