Ezra: Buy On Improved Performance & Corporate Restructure

1. Ezra reported tremendously improved financial performance for 3Q14. Revenue stood at US$402.1 million while net profits grew to US$10.2 million.

2. Ezra intends to consolidate its offshore services arm with an associate, ultimately turning the associate into a subsidiary.

3. Market watchers note that Ezra could ultimately become an investment holding company if it spin offs its subsea services arm. This could help unlock value for current shareholders.

Ezra Holdings (Ezra) announced its 3Q14 results which had improved tremendously in comparison with the similar quarter a year ago. Revenue for the quarter was up by 27 percent to US$402.1 million from the previous year’s US$317.1 million.

Profit after tax grew 6 percent to US$10.2 million from 3Q13’s US$9.6 million. The adjusted profit after tax which excludes gains from disposal of assets and investments saw the most gain. Adjusted profit after tax went from a loss of US$50.6 million to a profit of US$10.7 million.

The improved financial performance came merely days after the company announced its corporate restructure plan. Ezra will be consolidating its offshore services arm, EMAS Marine into its associate company, EOC Limited.

Ezra intends to consolidate its subsidiary, EMAS Marine, with an associate, EOC Limited

This transformation will turn EOC into a streamlined offshore service provider. It will add offshore support vessels to its current business of offshore construction, accommodation and production.

Currently listed in Oslo, Norway, Ezra has planned a secondary listing of the enlarged EOC on main board of SGX. The subsequent shareholding of Ezra in the enlarged EOC will be increased, allowing it to become a subsidiary of Ezra.

After the transformation, EOC will be one of the largest offshore service providers in the Asia Pacific with a fleet that is worth over US$1 billion. The consolidation of EOC will allow the firm to have synergistic access to the market and leverage on the current EMAS brand.

With this corporate restructure, Ezra will be able to concentrate on its subsea service business. However, words of a possible spinoff of its subsea service arm have been spreading in the market.

If this happens, Ezra will effectively become an investment holding company.

In view of the stronger performance and corporate restructure, Ezra is given a “Buy” call from CIMB Research with a target price of $1.47.

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