Ezion: The stock has priced in no contract extension, deep cuts in charter rates, and other bearish assumptions against current evidence to the contrary.
At a 70% long-term utilisation rate, zero contract extension, asset disposals at a 20% discount to book value, and higher-than-actual charter and repair costs, Ezion’s cash flow to equity from the contracts in hand today and asset liquidation are worth $0.61 per share in RHB's bear case, net of all debt. The stock has traded below this amidst market depression.
In a bid to spell confidence, management repurchased 2.5m shares in the last two weeks, with directors adding another 1.5m.
RHB maintains its Buy rating and TP of $1.60 based on 9x blended FY15/16F P/E, with long-term upward revision potential.
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