Liftboats are the biggest earnings driver in FY10. The first 2 liftboats will be delivered between late 2009 and 1Q10, and were already chartered out to Ezra Holdings on firm contracts. The second pair has secured LOIs for deployment to a Middle East-based client. These vessels could generate charter revenue of US$16-17m per vessel per year. Key risks are liftboat delivery delays from yards, and clients’ requests for later commencement dates for their contracts with Ezion.
Gorgon Project may boost industry credibility. Ezion is part of a consortium that has secured from Chevron an initial A$350m worth of marine supply contract for the Gorgon Project off the coast of Australia. Ezion would earn project management fees and income from the supply of 9 offshore vessels to the Gorgon projects. Key risks are postponement in vessel supply requirements and poorer-than-expected execution.
Initiate coverage with a BUY rating. We project Ezion to deliver 106% net profit CAGR over the FY09-11 forecast periods, assuming on-schedule deliveries of vessels. As such, we initiate coverage on Ezion with a BUY rating. Our fair value for Ezion is S$0.76; using 10x fully diluted recurring FY10 PE.
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