Ezra

Ezra: DMG Insti Sales has a note out on Ezra, reiterating their BEARISH view on the stock. House rehighlight their recent post that Ezra's recent results illustrated problems in the sector with both rising costs and falling margins and that the street was being far too optimistic. Last night, Saipem, one of the world’s largest integrated oil and gas service providers, fell 34% yesterday after releasing their latest FY12-13 earnings guidance which were significantly lower than consensus by 50% (for FY13). Saipem guided for 50% decline in FY13 EBIT overall but more importantly (from an EZRA viewpoint) they also said that they expected a 70-80% decline in onshore and offshore engineering and construction EBIT due to completion of high-margin projects, execution of lower margin contracts in FY13, delay in contract awards and investment in Brazil. Whilst the Brazil part doesn’t apply to EZRA, the rest clearly does The reasons given by Saipem are consistent with house neutral/negative view on the offshore construction sector. Think high wages, geographical expansion and competitive bidding will put pressure on operating margins for offshore construction players like Ezra Holdings and Swiber Holdings. Saipem released their revised earnings guidance for FY12 and FY13, whereby management expect FY12 EBIT to be lower 6% from their previous guidance and FY13 EBIT to fall 50% y-o-y. This new guidance simply highlights the ongoing margin pressure from the competitive environment. The latest guidance from the global giant in onshore and offshore construction supports our view that cost pressure and competitive bidding will put pressure on margins. Technically, Ezra has come off from the spike ahead of earnings post several downgrades and looks set to test the 50dma. Use a stop of any break above the $1.23 resistance line. EZRA looks very capped at $1.23.