Mistaken identity the culprit behind Ezion’s steep share price crash

Ezion is not a beleaguered offshore driller.

The sharp decline in Ezion's share price is a painful case of mistaken identity.

According to Maybank Kim Eng, Ezion has suffered for its association with offshore drillers, when it is in fact a liftboat builder.

Maybank Kim Eng noted that Ezion should not be associated with the beleaguered sector. Ezion is more resilient than offshore drillers because its liftboat business is more immune to rate declines.

"There has been extremely high shortselling of Ezion in recent months. We believe this is due to the market’s incorrect association of Ezion’s business with that of offshore drillers,” stated the report.

Here's more from Maybank Kim Eng:

We believe the market should not associate Ezion’s resilient liftboat business with offshore drilling. While there have been spurts of contract terminations and charter-rate declines for offshore drilling rigs, enquiries on liftboats for maintenance remain high in Asia and the Middle East.

There is less rate pressure on liftboats and that too, mostly from asset owners’ response to oil companies’ pleas. Comparatively, rate pressures on offshore rigs are a result of a rig supply glut and structural drilling weakness.

Some 90%/82% of Ezion’s FY15E/16E liftboat revenue of USD480m/626m is backed by firm contracts. The market is
mispricing Ezion, in our view, at below GMS and offshore drillers. At 3.5x FY16E PER, it even ignores its 28% FY16E EPS growth