Ezra

Ezra: CIMB upgrades to Add with $1.48 TP. The house notes that Ezra’s share price has underperformed the FSSTI by 20% YTD, making it one of the three worst-performing O&M stocks in Singapore. Given the more stringent offshore maintenance programme under the new management and its vessels’ gradual return to work, think that Ezra’s offshore division’s earnings troughed in 2Q14. Subsea, on the other hand, turned in positive net profit for three consecutive quarters with no major hiccups due to consistent orders secured. Think that Ezra’s share price is at an inflection point and see limited downside. We upgrade Ezra from Reduce to Add, following its 3-16% increase in FY14-16 EPS, on higher margins. Forecast a 67% yoy rise in FY15 core EPS but this is still 10% below consensus. Revised target price of $1.48 is based on 1x CY14P/BV (4-year average in 2010-13), instead of 11x CY15 P/E. The house thinks that P/BV is a better reflection of Ezra’s valuation due to its volatile earnings in recent years. The potential catalysts are stronger orders and margins.