Ezion / Ocean Sky

Ezion / Ocean Sky: CIMB maintains its high conviction O/p call on Ezion with $2.68 TP. Note that the restructuring of Ezion’s marine supply base business via a special purpose vehicle will enable the company to focus its resources on expansion of its service rig business while allowing it to continue reaping benefits from other business opportunities. Add that the restructuring, should also see the next shift in Ezion’s focus – from a service rig owner (provision of vessel only) to an operator (provision of both crew and vessel). Secondly, OSI will be able to develop the marine base using its own balance sheet, without stretching Ezion’s balance sheet or human resources. On completion of the acquisition, OSI will be a well-capitalised company with a starting equity base of $108m and will be primed to start work immediately. Last, the dilution for Ezion’s existing shareholders is minimal at 2%. Overall, house keeps FY13-15 EPS forecasts as there is marginal impact from the restructuring. Also intact are Outperform rating and target price, which remains based on a blend of P/E (7.7x CY14) and P/BV (2.3x CY13) valuations. Ezion is house top pick among small-to mid-cap O&M stocks.