BUY
Price S$0.670
Job awa rd positive; work to start in mid-2012. The US$55m initial contract to provide full logistics and support services for the Queensland Curtis LNG (QCLNG) project will begin in mid-2012. We are positive on the contract: (1) the job award is Ezion’s first job for the QCLNG project and we believe Ezion is well positioned to bid for more contracts; (2) assuming 18% net margin, we estimate US$10m net profit from this project over the duration of the contract. We maintain our EPS forecasts pending more details on the proposed capital raising exercise which we believe will be partially used to fund this project. Maintain BUY with an unchanged TP of S$1.07 based on 12x FY11/12F fully diluted EPS.
Investing in more assets to position for future growth. We understand that Ezion will provide at least ten tugs and barges to support the initial contract for QCLNG. Management plans to use more third-party tugs and barges at the start and is allocating ~US$40m to buy its own tugs and barges to support the contract and future opportunities on Curtis Island. This will be funded via a mix of debt and new capital to be raised from the proposed perpetual capital securities.
First project for QCLNG; expanding presence in Australia. The QCLNG is one of Australia’s largest capital infrastructure projects and is operated by the BG Group. Construction of the LNG project is underway, with first LNG delivery expected in 2014. This is Ezion’s first contract for the QCLNG project. Aside from this project, Ezion is also involved in the Gorgon project under the Offshore Marine Services Alliance (OMSA) Joint Venture. We believe Ezion has the right track record, experience and assets in Australia to benefit from rising LNG construction activities.
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