Here is Ezion's battle plan against Singapore's rising interest rates

1% rise in interest rates would have -2% impact on ROE.

According to Macquarie Research, Ezion arranges debt from the top 3 banks in Singapore and 2 Malaysian banks.

In a rising interest rate environment, management is looking to protect the returns (30% minimum that they work with) by swapping their existing “floating interest rate” loans to “fixed rate” which could cost them 100bps extra (Ezion pays Libor plus floating rate which comes to about 3% in  total).

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Thus, if interest rates go up to 4-5% for each SEUs, returns should still be in the high 35-45%  in our view. We have assumed 70% debt and 5% interest rate in our model, which translates into a very robust 40% ROE.

A rise of 1% in interest rate would have a negative impact of 2% on ROEs according to our sensitivity analysis.