Ezra

Ezra’s US$250m acqn of Aker Marine Contractors also viewed as positive as it would elevate Ezra to become a top-tier global subsea player. But short term earnings impact may be negative as AMC Is loss-making & share issue is dilutive. Reported disappointing 19% drop in 4Q earnings to US$21.6m although FY10 net profit of US$76m was up +9%.

FYAug10 results in line with Street estimates, which had already accounted for slower growth. FY10 revenue +7.3% yoy at US$354m, net profit +8.5% yoy at US$76m. For 4Q10, revenue +17% yoy at US$109m, net profit -19.5% yoy at US$21.6m. 4Q results were strongly aided by one-offs, and fair value gains on derivatives amounting to $

Separately, Ezra announced 2 acquisitions from Norway-listed Aker Solutions (AKS), i) Aker Marine Contractors (AMC), AKS’ subsea construction business, ii) 50% stake in a deepwater construction vessel, the AMC Connector….

AMC’s price tag of US$250m will be satisfied through mix of cash, convertible bonds and new shares, while the max consideration for the AMC Connector JV is US$75m. The acquisition of AMC is expected to be completed by Jan/Feb ‘11, while delivery for AMC Connector is scheduled in mid-‘11. Aker Solutions will hold 8.4% of Ezra on completion…

The marriage of Ezra’s construction vessel asset base and AMC’s existing market share and technical expertise will create the fourth-largest global subsea contractor, pitting Ezra alongside heavyweights such as Subsea 7/Acergy, Technip and Saipem. While AMC is currently loss making (US$22m loss in FY10), mgt believes margin rehabilitation is possible given synergies with Ezra’s own construction vessels, and expects to achieve EBITDA margins in line with the industry’s 20+% going forward…

M&A generally viewed positively. Deutsche, UOBK DBSV all maintain Buys, with targets ranging $2.10-2.80.