Hot stock: Ezion up amid active play among offshore marine stocks

SHARES of Ezion Holdings rose on Wednesday morning, in line with more bets on offshore marine stocks this week and amid broad market gains.

The stock closed 0.5 Singapore cent higher at S$0.515, and was among the most actively traded play. Some 37.9 million shares changed hands.

Still, Ezion may have its financial position tested further by late-payment customers, as well as a potential reduction in charter rates, a brokerage report said on Tuesday.

"Like many other oil and gas related companies, Ezion's clients are also not paying on time, with MNCs and international oil companies (vs national oil companies) still the better paymasters at about three months late," said OCBC Investment Research.

This comes as the group's net gearing was 1.1 times, up from 0.9 times in fiscal 2014. Operating cash flows were healthy at US$208.9 million.

"But going forward, we see that the group's financial position could be tested by late-paying customers, and potential reduction in charter rates (should the market worsen)," said OCBC, which had a "hold" rating on the stock.

CIMB Research, which had a "buy" recommendation, noted that Ezion is pushing capital expenditure to 2017-2018, delaying delivery of at least six rigs.

The average trade receivable days (net of provision) were 184, and while they are expected to worsen to 220 days in FY2016-18, Ezion is also expected to post positive free cash flow of about US$110 million in fiscal 2016, CIMB said.

Ezion has proposed a bonus warrant issue on the basis of one warrant for five shares, exercisable within four years at S$0.50 per share. This represents an approximate 20 per cent dilution of current share capital.

"We believe this is a fair deal, if investors take the view that oil price will recover in four years and are willing to stomach weak sentiment over the next two years," CIMB said on Tuesday.