Broker's Take: Ezra's risks tilted more to the downside, says OCBC

EZRA Holdings, a provider of offshore support services, has seen its share price among one of the hardest hit with the drop in global oil price, but more downside risks remain.

OCBC Investment Research's analyst, Low Pei Han, noted that the share price of Ezra, with its more deepwater-focused fleet, has dropped by about 30 per cent since the start of September, and has lost almost half of its value year-to-date. Its subsea segment also has exposure to the North Sea and there have been concerns about delays in project awards as well.

This is despite Ezra's delivery of improved core earnings of about US$29 million for the 2014 fiscal year ended August, compared to a core net loss of about US$37 million for FY2013.

"Looking ahead, we believe that the company has to demonstrate sustained utilisation levels in the OSV (offshore support vessels) division after having repair and maintenance issues for some vessels in 1H FY14, as well as continued order wins for the subsea segment, especially in a lower oil price environment,'' said Ms Low, who is keeping her hold call on the stock.

Taking into account the lower price-to-book multiples that Ezra's peers are trading at (Subsea 7 and McDermott at 0.7-0.8x, Swiber at 0.3x and POSH 0.8x), Ms Low derived at a fair value estimate of S$0.77 a share for Ezra.

At 11:44am, Ezra is trading flat, around S$0.76 a share.