Ezra's subsea order wins to rocket to US$1.5b

Sizeable backlog is confidence booster.

According to DBS, it expects Ezra’s  subsea order wins to ramp up across FY13/14 to US$1.0bn/US$1.5bn,  following strong YTD order wins of US$315m, as it bids for >US$4bn of  subsea work globally.

Here's more from DBS:

Its sizeable backlog of c. US$1.1bn ensures that its  subsea fleet is well booked through FY13, driving earnings upside from  positive operating leverage.

We see improving demand-supply dynamics in the OSV charter markets, supporting the firming of OSV day rates since 2011. Along with lower expected vessel maintenance downtime in  FY13/14 and management’s focus on boosting operational efficiency, we  expect gross margin expansion at the Offshore Support division of 5.5ppt/3.1ppt across FY13/14.

Ezra has recently refinanced the bulk of its outstanding convertible bonds, easing concerns over its ability to refinance these. It will also refinance near term debt with the majority of the proceeds raised from the recent issue of notes and perpetual securities.

More possible non-core asset disposals would further ease its balance sheet.

After a series of disappointing quarterly earnings performance across FY12 on poor offshore support performance and higher admin expenses, we believe the group is on a firmer footing and is poised to deliver earnings recovery of 203%/72% in FY13/14F.