Money Talk: PACC Offshore Services, Ezra Holdings

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. PACC Offshore Services (POSH)

Broker: OCBC

POSH is a leading Singapore-based company which operates a young and diversified fleet of 112 offshore vessels (including 45 which are owned by its joint ventures), as at Dec 31, 2013.

According to independent market research consultant Infield, POSH is the largest Asia-based international operator of offshore support vessels and one of the top five globally; and also has the youngest deepwater and midwater fleet of anchor handling tug supply vessels (AHTS) and platform supply vessels (PSV) globally, as at end Dec 2013.

We expect POSH to benefit positively from robust industry fundamentals, and forecast it to record a 59 per cent net profit compound annual growth rate from FY2013-2015.

Applying a target price-earnings ratio peg of 11 times (close to 5 per cent premium to its peers average, given its strong competitive positioning and superior margins) to our FY2015 forecast earnings per share, we derive a fair value estimate of $1.40. Initiate coverage on POSH with Buy.

2. Ezra Holdings

Broker: CIMB

Ezra's sale of its offshore support business to its Oslo-listed associate company, EOC (and the listing of the latter in Singapore by end-2014) provides room for EOC to gear up and seek new funding.

With the exercise, Ezra's stake in EOC would increase from 46 per cent to c.60 per cent, making EOC a listed subsidiary that is focussed on the marine and accommodation business, and the Ezra group a more attractive proposition for investors.

The enlarged entity will also have a lower net gearing of about 0.7 times, allowing Ezra more freedom to grow its subsea business.

The US$520 million sale price implies 8-9 times FY2015 EBITDA (earnings before interest, tax, depreciation and amortisation) of the offshore support business.

We maintain our Add call and target price of $1.48. Catalysts include stronger-than-expected margins and orders.

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