Ezion

Ezion: Grp announced that it is deepening ties with Mexican NOC Pemex. Ezion has secured a 6th service rig contract from Pemex, worth US$148.6m over 7 years (5+2) through a 50/50 JV with Kim Seng Holdings. The units will be deployed in the Bay of Campeche, and will take Ezion’s YTD contract wins to US$364.5m. DBSV note that the strengthening ties with Pemex and its expanding presence in the Gulf of Mexico (GoM) is a positive development for Ezion and boost FY13/14 earnings by 1.0%/2.4%. Total capex is estimated at US$80m (70% bank loans, 30% equity) and Ezion will fork out only US$12m cash to fund its 50% equity stake in the JV. These units will be chartered on bareboat basis at estimated day rates of ~US$58k/day starting end-Sept13. Taking into account a 10-year depreciation period, and 5% cost of debt, estimate full year net profit from the rig to be c. US$10.2m, or JV income of US$5.1 to Ezion. House understand that the service rig, which is supposed to be deployed in offshore Myanmar from April, may be delayed to mid-May due to an issue with owner-furnished equipment. The opportunity cost (loss of profit contribution) is expected to be minimal, estimated at about US$1m or <1% of FY13 profit. In addition, Ezion may be compensated by the customer, thus the net impact will likely be insignificant. Overall, maintain BUY; TP raised to $2.47. In line with higher FY14F P/E. Note that with a fortified balance sheet and a robust pipeline of potential projects, believe Ezion will continue to grow its project backlog and earnings stream.