Ezion

Ezion: Ezion has announced that it will i) acquire the entire share capital of Teras Conquest 4, to be satisfied by the issuance of 18.4mn new Ezion shares at $2.2407/share (~1.5% dilution amounting to S$41.2mn); and ii) increase its shareholding in associate, Kenai Offshore Venture (KOV), for US$23.95mn (~S$30.3mn) funded through internal resources. The acquisition of Tera Conquest 4 was to facilitate a flag change for the liftboat, in order to re-contract at a higher charter rate. PhillipCapital estimate potential earnings contribution of US$4.8-5.4mn (~2% of FY14E PATMI). House view the equity dilution of 1.5% (on new shares) as neutral. KOV (50:50 JV between Ezion and Australia-listed upstream player Buccaneer Energy) owns a jack-up unit currently providing drilling services in Cook Inlet off Alaska. As Buccaneer Energy is in need to raise capital for its main E&P activities, it is putting the 50% stake for sale at US$23.95mn. House estimate an increase in annual earnings contribution of ~US$3.8-4.1mn (slightly less than 2% of FY14E PATMI). Given the cash holdings on KOV (post transaction) of ~US$12mn, PhillipCapital estimate this would potentially accrue 31-34% ROE. As the first-mover in Asia liftboat market, Ezion is always taking steps to maintain its competitive edge. PhillipCapital keep earnings estimates intact, as there is marginal impact from the transactions. House maintain Accumulate rating and TP of $2.53, based on SOTP.