Ezra

Ezra: Barclays has a recent discussion with mgt and remains confident that Co. has sufficient financing optionality to manage its forthcoming convertible bond puttable in No12. Believe that investor concern over the co's balance sheet arising from aggressive asset build up over the past few years is overdone, especially considering the improvement in subsea profitability house expect in the coming qtrs. Various financing options available: The US$100m convertible puttable in November could be financed by: 1) straight bank loan, 2) bilateral debt issue (re-issue of straight debt to private investor/banks, 3) sale of non-core businesses/assets, or 4) a combination of the above options. Mgt reiterated that capex spending in 2013 and 2014 should be reduced significantly as its comes to the end of its asset build cycle. Co. is now focused on executing on the backlog that is has amassed and, with its current fleet, has the capacity to continue to bid for additional projects. Financial leverage should ease as subsea profitability improves: Ezra's management also highlighted that it expected its gearing (net debt/equity of c80% in 1H12) to improve gradually as its subsea business starts to contribute to its bottom line and as its capex spending eases. Subsea margins should improve in 2H12: Co continues to express confidence that subsea margins should improve in 2H12 as its subsea utilization rates continue to operate close to full available capacity. Overall, house maintain Buy with $1.70 TP.