• Room for more projects
• Up fair value to S$2.05
Share price continues its ascent
Since our last report on Ezion Holdings on 21 Nov 2012, “What a year, but the best is yet to come”, the company’s share price has appreciated by about 26%. There was hardly any major news on the company within this short period, except for the announcement in mid Dec that EDB Investments (EDBI) had invested S$19m in Ezion.
Gets EDBI’s support
The strategic tie up allows Ezion to leverage on EDBI’s extensive network of resources to further expand its business. Such an “endorsement” by EDBI is also likely to enhance Ezion’s reputation as an oil and gas player in the global scene. EDBI subscribed for 14.27m new shares at an issue price of S$1.3315, which is at a 10% discount to the VWAP of trades done on 14 Dec. This compares with the issue price of S$1.2645/share in the placement to Mr. Tan Boy Tee in early Nov.
Room for more projects
We estimate about US$240m worth of assets can be invested by Ezion (for FY14F delivery) without significant fund raising, assuming a
70-30 debt-equity breakdown in the financing of new assets. The use of joint ventures and sale-and-leaseback options also open the door to more project possibilities in the near term.
Increase fair value to S$2.05
We believe that upcoming data in early 2013 supports a thesis for improving conditions for Singapore equities, especially companies buttressed by good earnings visibility and favorable industry outlook. Also, with growing market recognition of Ezion’s capabilities and achievements, we believe that the group has successfully graduated to the mid-cap league which generally enjoys higher valuations than the smaller caps (Exhibit 1). We increase our peg to 12x FY13F earnings (prev. 9x), and also take into account a mild 1.6% dilution in the share base with EDBI’s entry. As such, our fair value estimate rises from S$1.70 to S$2.05. Maintain BUY.
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