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Broker's take: DBS upgrades Ezion to 'buy'; raises 12-month target price to S$0.29
ANALYSTS at DBS Group Research have upgraded their call on offshore and marine group (O&M) Ezion Holdings to "buy" and increased their 12-month target price on the stock to S$0.29 from S$0.13 as the company recovers from the prolonged industry downturn.
The upgrade follows an investment through a placement of shares and options of up to S$50 million by Temasek-linked Pavilion Capital on Apr 6.
DBS also cited the company's successful refinancing exercise in March which provided the firm "with a six-year runway with minimum repayment and interest" as key to its upgrade.
Moreover, Ezion has seen improving utilisation and day rates of its liftboats, which DBS said would also drive the company's recovery.
DBS analyst Ho Pei Hwa said in a research note on Tuesday: "We are more hopeful on Ezion's turnaround. While it has also been hit hard by the recent oil crisis, Ezion is among the few surviving players with a niche competitive edge in liftboats, a segment with brighter demand/supply outlook relative to other offshore support vessels."
In addition, Ezion is in talks with strategic partners that could offer financial support or liftboat assets to tap recovering demand in the O&M sector.
"We believe potential tie-ups with prominent industry players enhance Ezion's growth prospects, which would otherwise be constrained by its high gearing level. This serves as a catalyst for further re-rating," Ms Ho added.
Among risks to DBS's call is a slow recovery of oil and gas activities if crude oil prices fall below US$50 per barrel, which may drag demand and day rates improvement for liftboats.
DBS said that Ezion's shares, which are suspended, are expected to resume trading on April 17.