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Broker's Take: Macquarie rates Ezion 'outperform' amid share slump

MACQUARIE Research this week recommended investors buy into Ezion Holdings, which owns and charters liftboats, for its beaten down valuations.

Shares of Ezion slumped four Singapore cents, or 4 per cent, to S$0.95 in afternoon trading on Thursday. It was among the most actively traded stocks, with 18.5 million shares changing hands.

"Time to pull the trigger," the report on Wednesday said, which had an "outperform" rating, and a target price of S$1.50. "Punished for being in a bad egg basket, Ezion has now fallen well below its bear case, in our view."

It noted that Ezion is not a typical contractor, given that all 37 vessels have firm contracts from national oil companies (NOCs).

All of Ezion's vessels have locked-in contracts for three to seven years, and that too from top NOCs such as Petronas and Pemex.

"There have been no cancellations and none are likely, in our view," it said.

For a contractor, Ezion's 86 per cent leverage level is well maintained and will go down gradually as vessels are delivered, Macquarie added. Meanwhile, six contracts expiring this year are expected to be re-contracted without dayrate reductions.

"We think this is a big vote of confidence in Ezion's vessel quality and bargaining power," Macquarie said. "The risk-reward couldn't get any better: at current valuations, we believe the market is pricing in all possible risks - cancellations, delays and dayrate cuts. There is only upside to these assumptions."

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