Ezion Holdings LimitedEZHL.SI EZI SP

Ezion Holdings Limited EZHL.SI
EZI SP
EQUITY: CAPITAL GOODS
Stress test on Ezion’s earnings/cash flows
Global Markets Research
In this bear case, Ezion to turn into dividend yield
play, with +ve FCF and plunging capex
13 November 2014
Rating
Remains
Action: Buy on strong core profit growth even on our stress test
We retain our Buy and TP of SGD2.64. Ezion recently promised Triyards (ETL
SP, NR) to give/introduce USD150mn shipbuilding orders in the next four
months as part of their strategic tie-up. This implies that Ezion could win 2-3
more charter contracts from oil majors before end-1Q15F. But what if global
capex cuts are so severe that it does not win new charter contracts, despite
the typical resilience of Ezion’s liftboats/service rigs’ projects in the production
phase of shallow water oil fields that have oil price breakeven of USD40/bbl or
less? We conducted a stress test on Ezion’s profit and cash flows.
What if there are significant delivery delays and no new contract wins?
As a recap, Ezion currently has 21 operational liftboats/service rigs, 3 under
construction with scheduled deliveries in Dec 2014, and 13 in FY15-16F
(backed by secured charter contracts from oil majors with average 3-4 years
contract duration). In our stress test, we assume that Ezion will not win any
new contracts from Nov 2014, and its remaining 13 scheduled deliveries in
FY15-16F will have significant and total vessel delivery delays of 156 months,
vs. the 48 months of vessel delivery delays already built into our model. Our
FY15-16F net profit could be cut by 17-18%, and our TP would be reduced by
22% to SGD2.05. Still, at last closing, we believe Ezion trades at a reasonable
7x FY15F P/E (EPS: 0.16 US cents), even as projected core net profit growth
is cut by 26pp to 32% y-y. Indeed, with three more deliveries in Dec 14, Ezion
will have 24 operational units by early-15F vs 16 units in early-14.
Ezion likely to give its maiden dividend in FY15F on our stress test
Interestingly, in our stress-test scenario, we expect Ezion to consider maiden
dividend payout to shareholders in FY15F, as capex is negligible in FY16F.
Assuming a dividend payout of 30% for FY15-16F, we expect Ezion to still
achieve its LT net gearing target of 0.6x by end-FY16F, after generating
USD290mn of FCF in FY16F and core net profit of USD261-320mn in FY1516F. The potential current dividend yield would be 4.3-5.3% in FY15-16F.
FY15F
Singapore Capital Goods
Wee Lee Chong - NSL
[email protected]
+65 6433 6960
Abhishek Nigam - NSL
[email protected]
+65 6433 6978
Old
New
Old
New
Old
New
Revenue (mn)
282
422
422
664
664
826
826
Reported net profit (mn)
160
228
228
313
313
391
391
FY16F
142
197
197
313
313
391
391
9.76c
12.46c
12.46c
19.74c
19.74c
24.66c
24.66c
FD norm. EPS growth (%)
54.2
27.7
27.7
58.4
58.4
24.9
24.9
FD normalised P/E (x)
12.2
N/A
9.4
N/A
5.9
N/A
4.7
EV/EBITDA (x)
14.0
N/A
9.1
N/A
6.1
N/A
4.8
Price/book (x)
2.1
N/A
1.6
N/A
1.2
N/A
1.0
Net debt/equity (%)
SGD 1.48
Research analysts
FY13
ROE (%)
Closing price
12 November 2014
+77.8%
Nomura vs consensus
Our FY15F core net profit is 11%
above consensus, and is largely
backed by secured charter-out
contracts.
Actual
Dividend yield (%)
SGD 2.64
Anchor themes
We expect liftboats to benefit
from the need to do more
frequent, efficient, and safer
maintenance work on fixed
production platforms in Southeast
Asia.
Year-end 31 Dec
FD normalised EPS
Target price
Remains
Potential upside
Currency (USD)
Normalised net profit (mn)
FY14F
Buy
0.1
N/A
0.1
N/A
0.1
N/A
0.1
23.7
23.1
23.1
23.7
23.7
23.5
23.5
114.9
84.4
84.4
80.5
80.5
60.4
60.4
Source: Company data, Nomura estimates
Key company data: See page 2 for company data and detailed price/index chart
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Ezion Holdings Limited
13 November 2014
Key data on Ezion Holdings Limited
Relative performance chart
Cashflow statement (USDmn)
Source: Thomson Reuters, Nomura research
Notes:
Performance
(%)
Absolute (SGD)
Absolute (USD)
Rel to MSCI Singapore
1M 3M 12M
-5.7 -14.7 -14.3
-6.9 -17.4 -17.0
-7.5 -13.0 -15.3
M cap (USDmn)
Free float (%)
3-mth ADT (USDmn)
1,816.4
77.4
11.6
Year-end 31 Dec
EBITDA
Change in working capital
Other operating cashflow
Cashflow from operations
Capital expenditure
Free cashflow
Reduction in investments
Net acquisitions
Dec in other LT assets
Inc in other LT liabilities
Adjustments
CF after investing acts
Cash dividends
Equity issue
Debt issue
Convertible debt issue
Others
CF from financial acts
Net cashflow
Beginning cash
Ending cash
Ending net debt
FY12
74
19
-2
91
-654
-563
FY13
169
-3
-10
155
-734
-578
FY14F
286
-78
10
217
-434
-217
FY15F
468
-66
-31
371
-559
-187
FY16F
589
-22
-35
533
-454
79
2
-561
-1
101
436
1
-577
-1
72
530
1
-216
-1
155
50
1
-186
-1
0
200
1
80
-1
0
-50
101
638
77
58
135
418
6
608
31
135
166
920
-9
195
-21
166
145
991
-10
189
3
145
148
1,188
-11
-62
18
148
166
1,120
FY12
135
0
57
0
80
273
127
794
FY13
166
0
107
0
107
380
194
1,464
FY14F
145
0
157
0
107
408
221
1,802
FY15F
148
0
249
0
107
504
248
2,209
FY16F
166
0
309
0
107
581
276
2,471
0
4
1,198
77
33
47
158
475
0
5
2,043
223
69
84
376
863
0
5
2,437
223
40
84
348
913
0
5
2,966
223
67
84
375
1,113
0
5
3,333
223
105
84
412
1,063
12
645
0
4
1,243
0
4
1,264
0
4
1,491
0
4
1,478
-1
260
193
346
347
346
574
346
886
346
1,276
99
553
1,198
108
800
2,043
254
1,173
2,437
244
1,475
2,966
233
1,855
3,333
1.72
7.4
1.01
9.8
1.17
8.4
1.34
11.8
1.41
13.4
5.64
75.5
5.45
114.9
3.47
84.4
2.54
80.5
1.90
60.4
6.63c
5.52c
6.33c
0.46
0.00
11.28c
9.95c
9.76c
0.56
0.00
14.42c
12.46c
12.46c
0.74
0.00
19.84c
19.84c
19.74c
0.93
0.00
24.78c
24.78c
24.66c
1.17
0.00
103.4
0.0
122.6
-19.2
106.5
0.0
125.8
-19.2
114.0
0.0
95.3
18.7
111.6
0.0
60.3
51.3
123.5
0.0
77.9
45.6
Balance sheet (USDmn)
Income statement (USDmn)
Year-end 31 Dec
Revenue
Cost of goods sold
Gross profit
SG&A
Employee share expense
Operating profit
EBITDA
Depreciation
Amortisation
EBIT
Net interest expense
Associates & JCEs
Other income
Earnings before tax
Income tax
Net profit after tax
Minority interests
Other items
Preferred dividends
Normalised NPAT
Extraordinary items
Reported NPAT
Dividends
Transfer to reserves
FY12
159
-88
71
-13
FY13
282
-149
133
-13
FY14F
422
-210
212
-22
FY15F
664
-327
337
-21
FY16F
826
-404
422
-25
57
74
-17
120
169
-49
190
286
-95
316
468
-152
397
589
-192
57
-8
17
3
70
-4
66
0
120
-12
31
5
144
-3
142
0
190
-23
28
5
200
-4
197
0
316
-27
28
1
319
-5
313
0
397
-30
28
2
398
-7
391
0
66
13
79
-1
78
142
19
160
-1
159
197
31
228
-1
227
313
0
313
-1
312
391
0
391
-1
390
17.9
21.5
18.8
0.1
13.6
2.6
25.1
30.8
44.6
46.6
36.2
49.7
5.6
0.9
19.2
7.0
10.5
11.9
12.2
0.1
11.1
2.1
14.0
18.6
47.2
59.8
42.6
56.9
1.8
0.6
23.7
10.3
8.1
9.4
9.4
0.1
8.5
1.6
9.1
13.1
50.3
67.6
45.0
53.9
1.8
0.5
23.1
10.5
5.8
5.8
5.9
0.1
5.0
1.2
6.1
8.8
50.8
70.4
47.6
47.2
1.7
0.3
23.7
13.5
4.6
4.6
4.7
0.1
3.4
1.0
4.8
6.9
51.1
71.3
48.1
47.3
1.7
0.3
23.5
14.2
48.4
44.7
20.0
20.0
77.7
128.1
80.4
54.2
49.8
69.2
25.2
27.7
57.2
63.8
59.2
58.4
24.5
26.0
24.9
24.9
Valuations and ratios
Reported P/E (x)
Normalised P/E (x)
FD normalised P/E (x)
Dividend yield (%)
Price/cashflow (x)
Price/book (x)
EV/EBITDA (x)
EV/EBIT (x)
Gross margin (%)
EBITDA margin (%)
EBIT margin (%)
Net margin (%)
Effective tax rate (%)
Dividend payout (%)
ROE (%)
ROA (pretax %)
Growth (%)
Revenue
EBITDA
Normalised EPS
Normalised FDEPS
As at 31 Dec
Cash & equivalents
Marketable securities
Accounts receivable
Inventories
Other current assets
Total current assets
LT investments
Fixed assets
Goodwill
Other intangible assets
Other LT assets
Total assets
Short-term debt
Accounts payable
Other current liabilities
Total current liabilities
Long-term debt
Convertible debt
Other LT liabilities
Total liabilities
Minority interest
Preferred stock
Common stock
Retained earnings
Proposed dividends
Other equity and reserves
Total shareholders' equity
Total equity & liabilities
Liquidity (x)
Current ratio
Interest cover
Leverage
Net debt/EBITDA (x)
Net debt/equity (%)
Per share
Reported EPS (USD)
Norm EPS (USD)
FD norm EPS (USD)
BVPS (USD)
DPS (USD)
Activity (days)
Source: Company data, Nomura estimates
Days receivable
Days inventory
Days payable
Cash cycle
Source: Company data, Nomura estimates
2
Nomura | Ezion Holdings Limited
13 November 2014
What if there are significant delivery delays and no new
charter contract wins?
This report attempts to address investors’ persistent concerns on the “doomsday”
scenario wherein potential global capex cuts are so severe that: 1) Ezion does not win
any new charter contracts, and 2) there are oil majors’ requests for delays in the delivery
of service rigs, notwithstanding the possibility of the yards failing to meet scheduled
deliveries. Our conclusion from this stress test is that Ezion’s fundamentals are resilient,
and investors should start bottom-fishing the stock at the current share price.
We see four mitigating factors/implications in our stress test
1) Ezion’s FY15-16F profit growth should be largely driven by secured contracts
Ezion currently has 21 operational liftboats/service rigs, three under construction with
scheduled deliveries in Dec 2014, and 13 in FY15-16F (backed by secured charter
contracts from oil majors with average 3-4 years contract duration). Ezion is confident of
taking delivery of the three service rigs in Dec 2014, which will expand its operational
fleet by 50% y-y to 24 units, vs. 16 units in early-2014. Ezion still has 13 service
rigs/liftboats under construction, with scheduled deliveries in FY15-16F and are backed
by secured contracts from oil majors, and long average contract durations of 3-4 years.
Fig. 1: Total months of contribution from an expanded fleet
Fig. 2: Good earnings visibility for Ezion in FY15-16F
In our model, only 4% of the total months of contribution from Ezion's fleet
in FY15F are attributable to assumed contract wins from Nov 2014.
97% of our gross profit estimate in FY15F is backed by secured contracts,
assuming 48 months of total vessel delivery delays In FY15-16F.
600
400
Units
120%
USD mn
%
350
500
Total (months of contribution) - Secured
charter-out contracts only
300
100%
89%
80%
400
300
97%
100%
250
60%
200
Total (months of contribution) Assumed charter-out contracts only
80%
150
40%
200
100
100
20%
50
0%
0
Source: Company data, Nomura estimates
FY17F
FY16F
FY15F
FY14F
FY13
FY12
FY11
FY10
FY09
FY08
FY07
0
FY14F
FY15F
Gross profits (LHS)
FY16F
FY17F
% gross profits from secured charter contracts
Source: Nomura estimates
2) Demand for liftboats could fall only if crude oil price sustains below USD40/bbl
For the stress-test scenario to occur, Brent oil price needs to fall below the typical oil
price breakeven of USD40/bbl or less for shallow water oil fields, which explains the
typical resilience of Ezion’s liftboats/service rigs, vs. other offshore vessel types such as
drilling rigs, AHTS vessels, etc. Still, investors should note that at this low oil price, all of
the shale gas/oil projects and ultra-deepwater projects will no longer be economically
feasible, and the current global oil supply growth projection will plunge. Unless the world
has suddenly found an alternative energy source to fossil fuels, there will be crude oil
supply shortage globally, and crude oil prices will likely have to rebound again.
3) Stress test: Valuation still seems cheap vs. secured earnings growth in 2015F
Our stress test assumes that Ezion will not win any new contracts from Nov 2014
onwards, and its remaining 13 scheduled deliveries in FY15-16F will have significant and
total vessel delivery delays of 156 months in FY15-16F, vs. the 48 months of vessel
delivery delays already built into our current earnings model (Base case). As shown in
Fig 5, with 24 operational units in early-2015, the total months of contribution from
liftboats/service rigs will still increase 34% y-y in FY15F. Our FY15-16F net profits could
be cut by 17-18%, and our TP reduced by 22% to SGD2.05. At last closing share price,
we believe Ezion trades at a reasonable 7x FY15F P/E (EPS: 0.16 US cents), even as
our projected core net profit growth is reduced by 26pp to 32% y-y.
3
Nomura | Ezion Holdings Limited
13 November 2014
Fig. 3: Stress test - No incremental charter-out contract wins from now onwards, plus significant vessel delivery delays
We have built in a 30% dividend payout ratio for Ezion in FY15-16F, under the stress-test scenario, given the plunging capex and surge in FCF.
Stress-test scenario, vs our current earnings model
2014F
2015F
2016F
2017F
Base Case: Number of assumed service rig/liftboat contract wins
3
8
0
0
Stress test: No more contract win from November 2014, and in addition, there is 12
0
0
0
0
Stress-test
Base
197
197
261
313
320
391
363
453
% difference
0.0%
-16.8%
-18.3%
-19.9%
Stress-test
0.12
0.16
0.20
0.23
Base
0.12
0.20
0.25
0.29
% difference
0.0%
-16.8%
-18.3%
-19.9%
Stress-test
(216)
(118)
290
490
Base
(216)
(186)
80
349
% difference
0.0%
-36.9%
262.1%
40.2%
Stress-test
Base
96%
84%
99%
81%
62%
60%
26%
33%
% difference
13.3%
22.8%
2.9%
-23.8%
Stress-test
2.05
months delivery delay for each liftboat/service rig with scheduled delivery in 2015-16F
Recurring net profit (USD mn)
Diluted recurring EPS (USD)
Free cash flow (USD mn)
Net gearing (%)
T arget price (SGD)
Base
2.64
% difference
-22.3%
Implied P/E at target price (x)
Implied P/E at share price of SGD1.485 as of end-12
Stress-test
12.8
9.7
7.9
7.0
Base
16.4
10.4
8.3
7.2
% difference
Stress-test
-22.3%
9.2
-6.6%
7.0
-4.8%
5.7
-3.0%
5.0
Nov 2014 (x)
Base
9.2
5.8
4.7
4.0
% difference
0.0%
20.2%
22.4%
24.9%
Source: Nomura estimates
Fig. 4: We currently expect a 64% y-y jump in total months of contribution from operational liftboats/service rigs in FY5F
In our current earnings model, we have assumed a total of 48 months of vessel delivery delays for the 13 scheduled deliveries in FY15-16F.
4Q13
1Q14
2Q14
3Q14
4Q14F
1Q15F
2Q15F
3Q15F
4Q15F
1Q16F
2Q16F
3Q16F
4Q16F
In terms of number of units
Number of existing liftboat/service rigs removed from operational activities
14
3
1
16
0
0
16
1
0
17
3
1
19
3
1
21
4
0
25
3
0
28
2
0
30
5
0
35
0
0
35
1
0
36
5
0
41
2
0
Total number of liftboats/service rig in operation
16
16
17
19
21
25
28
30
35
35
36
41
43
Months of operation from existing liftboats/service rigs in operation (since the previous quarter) 42
48
0
0
48
3
0
51
6
3
57
6
1
63
12
0
75
9
0
84
6
0
90
13
0
105
0
0
105
3
0
108
14
0
123
6
0
48
51
54
62
215
65
75
84
90
103
352
137
105
108
122
129
464
112
Existing number of liftboats/service rigs in operation (since the previous quarter)
Number of new liftboat/service rigs in operation
In terms of number of months of contribution
Months of operation from new liftboats/service rigs deliveries
Months of operation from existing liftboat/service rigs removed from operational activities
5
3
Total (months of contribution from all operational units)
Number of increase in months of contribution from all operational units
44
150
87
Annual % increase in months of contribution from all operational units
138%
Total months of liftboats/service rigs in operation
43%
64%
32%
Source: Nomura estimates
Fig. 5: Stress test: We assume no contract wins from Nov 2014, and 156 total months vessel delivery delays in FY15-16F
Due to the 12 months delivery delays each for all 13 vessels with scheduled deliveries in FY15-16F in our stress-test scenario, there will only be 9
liftboats/service rigs under construction as of 1Q15F that will be delivered by end-2016F.
4Q13
1Q14
2Q14
3Q14
4Q14F
1Q15F
2Q15F
3Q15F
4Q15F
1Q16F
2Q16F
3Q16F
4Q16F
Existing number of liftboats/service rigs in operation (since the previous quarter)
14
16
16
17
19
21
24
24
24
24
25
33
33
Number of new liftboat/service rigs in operation
3
0
1
3
3
3
0
0
0
1
8
0
0
Number of existing liftboat/service rigs removed from operational activities
1
0
0
1
1
0
0
0
0
0
0
0
0
Total number of liftboats/service rig in operation
16
16
17
19
21
24
24
24
24
25
33
33
33
Months of operation from existing liftboats/service rigs in operation (since the previous quarter)
42
48
48
51
57
63
72
72
72
72
75
99
99
Months of operation from new liftboats/service rigs deliveries
Months of operation from existing liftboat/service rigs removed from operational activities
5
3
0
0
3
0
6
3
6
1
9
0
0
0
0
0
0
0
3
0
16
0
0
0
0
0
Total months of liftboats/service rigs in operation
44
48
51
54
62
72
72
72
72
75
91
99
99
Total (months of contribution from all operational units)
150
215
288
Number of increase in months of contribution from all operational units
87
65
73
76
Annual % increase in months of contribution from all operational units
138%
43%
34%
26%
In terms of number of units
In terms of number of months of contribution
364
Source: Nomura estimates
4
Nomura | Ezion Holdings Limited
13 November 2014
4) Ironically, Ezion could pay maiden dividends in FY15F in our stress-test case
Interestingly, in our stress-test scenario, we expect Ezion to consider a maiden dividend
payout to shareholders in FY15F, as capex is negligible in FY16F. Indeed, Ezion only
has about USD500mn remaining capex to be spent for the liftboats/service rigs currently
under constructions. Assuming a dividend payout of 30% for FY15-16F, we expect Ezion
to still achieve its long-term net gearing target of 0.6x by end-FY16F as per Fig 3, after
generating USD290mn of free cash flows in FY16F and core net profit of USD261320mn in FY15-16F. The likely projected dividend yield would be 4.3-5.3% in FY15-16F.
Fig. 6: Base case with our FY15-16F cash flow estimates
Fig. 7: Stress test on FY15-16F cash flows
In our earnings model, we assume USD600mn of uncommitted capex to
be incurred by Ezion in FY15-16F, in addition to its committed USD500mn
capex (as of end-3Q14) to be spent from 4Q14F-4Q16F.
We conservatively assume the bulk of the committed USD500mn capex
will be paid in advance by Ezion to the yards in 2015F despite the delivery
delays, and there is no uncommitted capex as there is no new contract.
600
Operating cash flow (USD mn)
600
Operating cash flow (USD mn)
400
Free cash flow (USD mn)
400
Free cash flow (USD mn)
-600
-800
-800
FY12
FY16F
-600
FY15F
-400
FY16F
-400
FY15F
-200
FY14F
-200
FY13
0
FY12
0
Capex (net) (USD mn)
FY14F
200
FY13
200
Capex (net) (USD mn)
In our stress test scenario, Ezion will have capacity to pay 30% dividend
payout, as it needs not incur new uncommitted capex, and yet achieve
similar 0.6x net gearing by end-FY16F as in our base case.
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
Total debt/Equity ND/Equity
Source: Company data, Nomura estimates
FY12
120%
100%
FY16F
120%
FY15F
140%
FY14F
140%
FY13
160%
FY12
160%
Dividend payout ratio
Total debt/Equity ND/Equity
FY16F
Fig. 9: Stress test on our FY15-16F net debt
In our base case scenario, we assume negligible dividend payout, as
Ezion is still in high growth phase, and needs to conserve cash for
possible uncommitted capex if there are new charter contract wins.
FY15F
Fig. 8: Base case with our FY15-16F net debt
FY14F
Source: Company data, Nomura estimates
FY13
Source: Company data, Nomura estimates
Dividend payout ratio
Source: Company data, Nomura estimates
A recap on the conservative assumptions in our model
Stress test aside, we reiterate three key conservative assumptions built into our current
earnings model to act as buffer against unforeseen vessel delivery delays in FY15-16F
for Ezion’s existing and new charter contracts. This implies potential upside to our
forecasts if Ezion can execute better than expected.
A) Delivery delay assumptions built into our earnings model
We assume six-month vessel delivery delays for five liftboats and three service rigs
(which are backed by secured charter-out contracts) that have targeted delivery dates
after end-2014. The total months of delivery delays built into our earnings model is 48.
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Nomura | Ezion Holdings Limited
13 November 2014
Fig. 10: A total of 48 months of delivery delays from scheduled liftboat and service rig
deliveries in 2015-16F has been built into our earnings model for Ezion
Vessel
Liftboat 11
Liftboat 12
Liftboat 13
Liftboat 14
Liftboat 15
Service rig 16
Service rig 17
Service rig 19
Target delivery date.
Mid-2Q15
Early 2Q15
Early 4Q15
Mid-1Q16
Mid-3Q16
Mid-1H15
Mid-1H15
Mid-2Q15
Assumed delivery date
Mid-4Q15
Early 4Q15
Early 2Q16
Mid-3Q16
Mid-1Q17
Mid-2H15
Mid-2H15
Mid-4Q15
Assumed delivery delays
6 months delay.
6 months delay.
6 months delay.
6 months delay.
6 months delay.
6 months delay.
6 months delay.
6 months delay.
Source: Company data, Nomura research
Fig. 11: Range of Ezion’s secured charter contracts’ duration
Fig. 12: Number of new liftboat/service rig contract wins
The long contract durations offered by oil companies reflect the typical
operational stability in shallow water oil and gas production phases
Ezion has secured 8 new charter contracts from oil majors in YTD 2014,
and it is not aggressive to assume 11 contract wins in 4Q14-4Q15F.
Number of new service rig/liftboat contracts win
14
10
9
Units
9
12
8
7
7
10
6
5
8
5
4
4
3
6
3
2
2
2
4
2
1
1
1
1
2
Source: Company data, Nomura research
5+2
3+2
3+1
2+2
3+1+1
Years
2+1
7
5
4
3
2
0
0
FY11
FY12
FY13
YTD in 2014
Source: Company data, Nomura research
B) Longer-than-usual construction period for assumed contracts vessels
We assume a longer-than-usual construction period for vessels built to service those
eleven assumed charter-out contract wins in our model. We assume c.30-months
construction periods for the five liftboats related to the assumed contract wins in 4Q14 to
4Q15, vs. a typical timeframe of 20-22 months. We also assume 12-15 month
construction period for service rigs to be built to service the six assumed charter-out
contract wins in the 4Q14 to end-2015 period, vs. a typical timeframe of 4-12 months.
Fig. 13: Contract win assumptions in our current earnings model, vs. delivery dates
Name
Liftboat
Liftboat
Liftboat
Liftboat
Liftboat
Service
Service
Service
Service
Service
Service
17
18
19
20
21
rig
rig
rig
rig
rig
rig
20
21
22
23
24
25
Assumed contract win period
2H14
2015
2015
2015
2015
2H14
2H14
2H15
2H15
2H15
2H15
Delivery period
4Q16
4Q17
4Q17
4Q17
4Q17
3Q15
3Q15
3Q16
3Q16
3Q16
3Q16
Source: Company data, Nomura estimates
C) Possible upside to newbuild accommodation heavylift vessel's DCR
We assume Ezion’s only newbuild accommodation heavylift vessel (delivered in mid4Q14) to get subpar time-charter day charter rates (DCR) of USD62,000 forever (slightly
higher than for a typical liftboat), vs. the USD200,000-300,000 spot rates for its sister
vessel (not owned by Ezion) that is doing offshore construction works in the North Sea.
Ezion is now actively sourcing for contracts in the North Sea to utilize the full potential of
this UK North Sea-certified vessel, so as to maximise its potential utilisation rates.
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Nomura | Ezion Holdings Limited
13 November 2014
Appendix A-1
Analyst Certification
I, Wee Lee Chong, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views
about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or
will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of
my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc.,
Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures
The term "Nomura Group" used herein refers to Nomura Holdings, Inc. or any of its affiliates or subsidiaries, and may refer to one or more
Nomura Group companies.
Materially mentioned issuers
Issuer
Ezion Holdings Limited
Ticker
EZI SP
Price
SGD 1.48
Ezion Holdings Limited (EZI SP)
Price date
Stock rating Sector rating Disclosures
12-Nov-2014 Buy
N/A
SGD 1.48 (12-Nov-2014) Buy (Sector rating: N/A)
Rating and target price chart (three year history)
Date
06-Nov-14
10-Oct-14
17-Sep-14
21-Aug-14
21-Aug-14
Rating Target price
2.64
2.67
2.61
Buy
3.13
Closing price
1.47
1.575
1.835
1.867
1.867
For explanation of ratings refer to the stock rating keys located after chart(s)
Valuation Methodology We have a SGD2.64 target price, which is based on sum-of-the-parts (SOTP) of: (1) discounted cash
flow model that takes into account our estimate of the life spans for Ezion’s service rigs and liftboats; (2) 7x P/E on jointly owned
service rigs and vessels; and (3) relevant values for listed associates, which can be based on market value, net tangible value,
or cost of listed associates, where appropriate. The benchmark index for this stock is the MSCI Singapore Index.
Risks that may impede the achievement of the target price Key risks to our target price and rating include: (1) vessel
delivery delays; (2) charter-out contract renewal risk for service rigs; and (3) shorter duration for renewed contracts, if Ezion
cannot local flag the liftboats.
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not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of NSI, and may not be subject to
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Nomura | Ezion Holdings Limited
13 November 2014
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Nomura | Ezion Holdings Limited
13 November 2014
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