Money Talk: Ezra Holdings, SIA Engineering

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Ezra Holdings

Broker: CIMB

Ezra's share price has underperformed the Straits Times Index by 20 per cent year-to-date, making it one of the three worst-performing offshore and marine stocks in Singapore.

Given the more stringent offshore maintenance programme under the new management and its vessels' gradual return to work, we think that Ezra's offshore division's earnings troughed in Q2.

Subsea, on the other hand, turned in positive net profit for three consecutive quarters with no major hiccups due to consistent orders secured. We think that Ezra's share price is at an inflection point and see limited downside.

We upgrade Ezra from Reduce to Add, on higher margins. Our revised target price is $1.48. The potential catalysts are stronger orders and margins.

2. SIA Engineering

Broker: Maybank Kim Eng

We hosted the management of SIA Engineering (SIAEC) to a non-deal roadshow in Singapore on Tuesday. Management acknowledged investors' concern over labour cost pressures in Singapore, but highlighted that its operational efficiency would compensate for the disadvantage of operating in a country with relatively high labour cost base.

Responding to a question regarding potential threats from new entrants to Changi Airport's line maintenance market, management thinks that the threat is fairly low and believes that access to hangar facilities remains a competitive advantage for the group.

SAESL, its engine joint venture with Rolls-Royce, expects to execute heavy shop visits for the Trent 1000 series of engine in two years' time.

We remain positive post the non-deal roadshow and reiterate our view that SIAEC offers the best proxy to the structural air traffic growth in the region. However, we sense the cautious undertone in management's commentary and see it as an attempt to manage market expectations.

The stock continues to offer an attractive yield of about 5 per cent over our forecast years. Maintain Buy with target price of $5.75.