Ezra Holdings Ltd - How is it going to finance its debt?

27/1/2014 – Ezra Holdings has posted increased revenue on the contributions from its subsea and marine services businesses, while its offshore support services division took a dip.

In the meantime, with an order book of US$2 bln and utilisation of its Offshore Support Services Division at 90%, management says it will focus on completion and deliveries.

The company has its sights on the long term for the oil & gas industry which is expected to spend more on new vessels, equipment and services.

These are the company's Q1FY14 financials published on January 10, 2014:

Revenue: +22% to US$339.8 mln
Profit: +11% to US$8.7 mln
Cash flow from operations: US$45.5 mln vs (US$52.7 mln)
Dividend: None
Order book: US$2 bln over undisclosed time period

Revenue climbed 22% thanks to contributions from subsea services and marine services, which were partially offset by a decrease in offshore support services.

Subsea services grew because of more projects, some of which were of higher value.

It also booked additional variation orders from projects closed out in Q1FY14, and revenue from subsea construction vessels, Lewek Express and Lewek Centurion, both delivered in Q4FY13.

Marine services grew because there was an increase in engineering and fabrication activities in Q1FY14 where more revenue was captured by three self-elevating units which are at the advance stage of completion.

This increase in revenue was then partially offset by revenue generated in Q1FY13 from one anchor handling tug supply vessel and two platform support vessels which were delivered subsequent to Q1FY13.

Offshore support services fell because vessels were undergoing repairs and maintenance in transit to their next areas of operations.

But this decrease was partially offset by inclusion of revenue from two platform supply vessels: Lewek Avior and Lewek Alkaid, as these were delivered subsequent to Q1FY13.

Sales costs increased from US$228.8 mln to US$289.2 mln, up US$60.4 mln.

Cash flow turned positive to US$45.5 mln from a cash burn of US$52.7 mln.

Debt as at November 30, 2013, is US$1.36 bln, of which US$516.4 mln is repayable within a year or less.

Ezra spent to date S$88.1 mln of the S$121 mln raised through a share issue on March 16, 2012, for the repayment of existing debt and general working capital.

It also used S$124.3 mln of the S$150 mln raised through Fixed Rate Subordinated Perpetual Securities under its US$500 mln Multicurrency Debt Issuance Programme established on August 28, 2012, to finance existing debt and purchase equipment.

Also for financing debt, Ezra fully used the S$25 mln raised from its S$25 mln Fixed Rate Notes issued under the same US$500 Multicurrency Debt Issuance Programme.

Separately, Ezra announced the incorporation of new subsidiary in Texas, Emas Marine Base Holding Co., LLC just after Christmas.

The sole shareholder in Emas Marine Base is EMAS-AMC AS which is a wholly-owned Ezra subsidiary.

The initial capital contribution to Emas Marine Base is US$100.

No further details were in that December 26, 2013 announcement.

More recently on January 17, J.P. Morgan (S.E.A.) Limited has been appointed advisor to Ezra to evaluate its strategies to grow the subsea business and improve visibility of EMAS AMC which does subsea and floater installations.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. How does it intend to finance the US$512.4 mln debt?

Ezra has a US$2 bln order book but in the absence of commentary to the contrary it could be years before it sees any cash flow from this.

It has in reserves US$177.5 mln and a cash flow of US$31.3 mln as reflected in the Q1 results here, but even so, it is still a question to ask exactly how the company will handle its debt.

Question

2. Over what time frame is the S$2 bln order book going to be delivered?

Refering now to the new subsidiary Emas Marine Base Holding Co., LLC:

Question

3. How much is it expected to contribute and when will it begin?

(Total number of questions in the full story: 12)

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