Ezion's recurring net profit soared 142% to $36.3m

Thanks to these 3 factors.

According to DBS, Ezion reported a stellar set of 2Q results, bringing 1H13 net profit to US$64.7m or 51% of DBS' and consensus’ FY13 estimates. 

2Q recurring net profit surged 142% y-o-y and 28% q-o-q to S$36.3m on the back of 1) fleet expansion, 2) commencement of three LNG projects at Curtis
Island and 3) margin improvement.

While revenue growth of 81% y-o-y and 23% q-o-q was well expected, there was positive surprise seen on the margin front.

Here's more:

Raise margins and forecasts. EBIT margins leaped 6.7ppts yo-y from 37% to 43.7% in spite of higher revenue contribution from the lower margin offshore logistic segment, from 30% to 45%.

While the purchase of an additional 2-3 pairs of tugs and barges, management fees from JV, and economies of scale aided profitability, management’s excellent project execution is remarkable.

We have revised up FY13/14F EBIT margins by 3.8/0.7ppts to 42%/44.9% and factored in an additional S$6m management fees in 2H.

This leads us to revise recurring net profit for FY13/14F up by 11%/3%.

Ezion has increased the fixed rate debt ratio from 20% (through bonds) in 2Q to 40% as of 3Q by swapping floating rates to fixed rates at an extra cost of 70bps. In our model, we have assumed effective interest rates rising by 0.6ppt and 0.7ppt for FY13 and FY14 respectively.