In its latest development, Ezion has formed a joint venture with China Merchant Group’s 52%-owned subsidiary, TSC Group to cooperate in the ownership and operations of liftboats.
“We believe such tie-ups with prominent industry players enhance Ezion’s growth prospects, which would otherwise be constrained by its high gearing level,” says analyst Ho Pei Hwa in a Monday report.
Nevertheless, Ho remains hopeful on Ezion’s turnaround, though this has been taking longer than expected.
While it has also been hit hard by the recent oil crisis, Ho says Ezion is among the few surviving players with an edge in liftboats, a segment with better demand and supply outlook relative to other offshore support vessels.
DBS says its FY19F book value has only factored in US$1.1 billion ($1.5 billion) total impairments made in 2015-2017 while assuming full conversion and exercise of bondholders’ warrants in 2020.
“While it is darkest before dawn and the stock’s valuation has been greatly discounted for the slow recovery, clearer signs of a turnaround are required to re-rate the stock,” says Ho.
Key risks include drop in oil price below US$50/bbl which would drag down demand and day rates for liftboats.
As at 2.27pm, shares in Ezion are down 0.2 cent at 4.8 cents or 5.3 times FY20F earnings.
