Ezra Holdings set for blistering growth in 2013

Look past 4Q12 to see the firm's amassing earnings potential, says CIMB.

Here's more from CIMB:

Investors should look beyond 4Q12 to focus on FY13 as Ezra is on track to deliver 125% earnings growth. The growth would be led by better subsea utilisation, a recovery in day rates for its offshore division and stronger orders for niche self-elevating units, benefiting Triyards.

We reduce our FY12 EPS by 5% to account for lower offshore margins in 4Q12. Nevertheless, catalysts are still expected from stronger-than-expected orders and margins.

Refinancing fever.We are neutral on Ezra’s recent debt and equity issues. These comprised S$200m 3-year 5% fixed-rate bonds and S$150m perpetual bonds at 8.75%. Proceeds will be used to refinance its short-term loans and lengthen their maturities.

Its issue of perpetual bonds could be part of a herd movement following Ezion’s similar bond issue recently. The perpetual-bonds fever also signifies a difficult financing environment for O&M small/mid-caps in Singapore. That said, present refinancing could be the safest move to lock in funding for the
longer term.

S$0.86 /share for Triyards, after listing? Separately, we met Triyards’ (Ezra’s fabrication division) management recently and came away positive. Triyards’ order book is US$200m (US$613.1m including Lewek Constellation). It is in a sweet spot to benefit from growing demand for niche self-elevating units (SEUs). Our checks on the ground with several Singapore O&M operators confirm Triyards’ good reputation for execution, especially in the construction of turnkey SEUs.

FY13 the big kicker. Stay invested. FY13 could be the turning point for Ezra as earnings are expected to leap by 125%, backed by growth in all three divisions. Our FY13-14 forecasts are 12% below
consensus.