■ Issuance of 5-year SGD120m notes at low rate of only 3.65%. Notes backed by committed funding facility provided by DBS.
■ Affirms credit worthiness of Ezion and the bank’s confidence it its business despite the oil and gas downcycle.
■ Maintain BUY and TP of SGD1.55, based on 1.2x FY15 P/BV.
Ezion is issuing SGD120m worth of 5-year notes under its SGD1.5b
debt issuance programme at a rate of only 3.65%. This is the
lowest rate not only among the bonds it has previously issued, but
also lowest among Singapore small-mid-cap O&M companies.
Furthermore, the notes are backed by a committed funding facility
provided by DBS. This means that the bank cannot withdraw this
facility unless Ezion breaches its covenants.
What’s Our View
In our view, Ezion’s continued access to the debt capital markets
and at such low cost reflects the bank’s confidence in its business.
Comparatively, Ezra Holdings had to raise SGD200m through a
rights issue at 38% discount to its theoretical ex-rights price
recently. The 3.65% is also substantially lower than bond yields
(Figure 1) of most O&M peers and closer to that of the large caps.
Ezion had USD345m of cash as at 1Q15. The new funds, together
with expected improvement in operating cashflows would help
strengthen its balance sheet and meet any near term debt and
capex obligations. We have not factored in the new loans into our
balance sheet forecast, pending further review after its 2Q15
results, which is expected on 13 Aug 15.
We acknowledge the downside risks to earnings due to deployment
delays and price pressure, but this would not be as severe as those
of OSVs and drilling rigs given liftboats’ focus on production
. We continue to prefer Ezion for sector exposure given its
more defensive liftboat business. Stock is trading near all-time
low. Depressed valuations of 0.7x P/BV unjustified. Maintain BUY
and SGD1.55 TP, based on 1.2x FY15 P/BV
. (Read Report)
Source : Maybank Kim Eng Research
Labels: Ezion Holdings, Offshore Marine Sector