Project-packed Ezion Holdings could seek more funding

Sale-and-leaseback is one possible option, says Maybank Kim Eng.

Ezion has been racking up contract wins at a rate of almost one new contract a month, notes the brokerage firm, and at this rate, it could end up looking for more funding sources to keep its strong performance chugging along.

Here's more from Maybank Kim Eng:

Results within expectations. 2Q12 results were boosted by a USD13.8m gain on divestment of a liftboat unit while JV income was 28% lower QoQ at USD2.7m as it was negatively affected by translation losses due to depreciation of USD against Euro. Excluding these effects, 2Q12 results were generally within expectations. Revenue came in at USD37.2m (+41% YoY, +21% QoQ) with corresponding net profit of USD28.1m (+130% YoY, +100% QoQ).

Expect a stronger 2H12. We expect a stronger core performance for 2H12 as contributions for its QCLNG project should kick in, as well as the deployment of unit-10, unit-11, and unit-12 service rigs and unit-14 liftboat in 2H12. Gross margins are expected to be sustained at current levels of 45-46%.

Bumper year of contract wins. This has been a bumper year in terms of contract wins for Ezion with almost one new contract win a month. In addition to the USD71m APLNG marine logistics contract announced last week, Ezion has secured a 5-year USD80m service rig contract and signed another letter of intent to provide another service rig for USD87.6m over a 4-year period.

Gearing and funding. We believe that Ezion has the financial resources to fund its current projects. It established a SGD500m debt issuance programme earlier this year which we expect to be drawn down to fund requirements for its projects. This would drive net gearing up to near 100% by end 2012. However, increasing operating cashflows as more units are deployed and projects get started should ease the gearing level subsequently. We expect it to turn free cashflow positive in FY14F. If it secures more projects, it may need to look at more funding sources, and making a sale-and-leaseback of its existing units is one option it may look at.