Ezra

Ezra: 1Q15 results came in below estimates. Net profit jumped more than 8x to US$54.4m, due largely to a US$67.5m contribution from other income, as a result of one-off gain on bargain purchase from the acquisition of subsidiaries (US$106.3m) and an FX gain of US$9.4m, partially offset by loss on step up of associate and JV companies (US$42.3m) and impairment of fixed assets (US$10.0m). Stripping off the above, core profit after tax would have come in at US$5.2m (-40%) due to a decrease in revenue from the Subsea Services and Offshore Support and Production Services Division. This was a result of some vessels undergoing maintenance, lower number of project closeouts during the quarter, and on-going weakness in the shallow water PSVs segment. This was offset partially by higher contributions from the Marine Services Division, led by new source of revenue contribution from the newly acquired subsidiaries of Triyards Holdings, collectively known as the “Strategic Marine Entities”, and higher level of fabrication activities from the existing operations. Gross margin fell 2.7 ppt to 12.2% from 14.9%, mainly due to the a lower gross margin contribution from the Offshore Support and Production Services Division as a result of weakness in the shallow water PSV segment. Bottom-line was partially aided by a 12% rise in associate contributions to US$3.8m (+12%). Going forward, the group guides that the recent decline in oil prices has affected the global capital markets, it believe that the long-term fundamentals of the O&G industry remains encouraging and that this is expected to drive the continued spending in segments that Ezra operates in. Ezra currently has a healthy order backlog of ~US$2.5b, which underpin earnings visibility over the next two years. Net gearing stands a tad-high at 1.14x, although the group aims to rationalise non-core assets over the longer-term, which will allow for the de-leveraging of the group’s balance sheet. At the current price, Ezra trades at an undemanding 0.32x P/B.