More contract wins ahead for Ezion Holdings: Maybank

Latest S$125m fund-raising exercise a big sign it has bagged some contracts.

Here's more from Maybank Kim Eng:

Fund-raising heralds new contracts ahead. Ezion recently completed an issuance of SGD125m 7.8% perpetual securities. Over the past year, Ezion’s contract announcements were often preceded by some fund-raising exercises. We believe that the current issuance could be a sign for more contract wins ahead. While it would be hard to guess what kind of contracts Ezion would secure, we postulate that incremental net profit potential could be up to USD3-7m per unit of service rig contract and USD6.5-7.5m per unit of super liftboat contract.

High cost of perpetuals not a concern. At 7.8%, the cost of funding may appear relatively high compared to the previous bond issue which was at 5.25%. However, given Ezion’s high ROEs for its projects (typically>30%), we see no cause for concern. Moreover, yearly distribution for the perpetuals would only amount to SGD9.75m which Ezion should be able to support comfortably as we expect it to turn free cashflow positive from FY14F.

Forgotten marine supply bases. Ezion’s marine supply base business has often been forgotten. As offshore activities turn more prolific in Australia, Ezion’s marine supply bases could be a force to be reckoned with. Its two marine supply bases are strategically located in Western and Northern Australia, in close proximity to offshore projects in the area. We have not accounted for this in our forecasts.