OCBC Investment Research
Market Pulse
14 Sep 2012
2
Ezion Holdings: S$1b company and
growing
●Good performance warranted
●Upside still there
●But recent run-up has been fast and
furious
Stock has performed very well for good
reason
The stock of Ezion Holdings (Ezion) has
performed very well in the past few months,
rising more than 75% since early Jun. In
comparison, the STI and the FTSE Oil and
Gas Index have appreciated by about 12%
and 19% respectively over the same period.
YTD, Ezion is up about 92%. The good
showing has been due to the clinching
contracts at attractive rates of return,
smooth execution of projects, and
commendable quarterly earnings.
1st O&M company to issue perpetual
securities
The company recently also proposed a
perpetual securities issue (S$125m of 7.8%
subordinated perps), and if successfully
issued around mid Sep, Ezion will be the first
offshore and marine company in Singapore to
issue such securities. This projects the strong
sense of confidence that management has in
the growth of the company. A good take-up
of the securities would also reflect investors’
faith in the sustainability of the group’s
earnings.
Triyards listing, LNG events also help
sentiment
There is also the possibility that the proposed
listing of Triyards Holdings has helped
sentiment recently due to increased
awareness of the self-elevating unit. We also
note that the frequency of news reports and
the number of LNG conferences has
increased considerably in the past six months
as well. Ezion has, and is likely to continue,
to be a beneficiary of LNG capex.
Now a S$1b company, but upside
potential still there
Ezion Holdings has been our small-mid cap
pick since we highlighted it in our year-end
strategy report last year, but with a market
cap of about S$1b now, it should henceforth
be better classified as a mid-cap counter.
Looking ahead, we roll forward our valuation
with an unchanged peg of 9x FY13F earnings,
and our fair value estimate increases from
S$1.20 to S$1.53. Maintain BUY with a oneyear
horizon, but be cautious of a near-term
pull back given the recent run-up. (Low Pei
Han)
. . . . .
OSIM International: Strong execution to
tide through uncertainties
●Innovation to help buffer macro
slowdown
●Shares +14% since our ‘laggard play’
theme
●Still see value at current levels
Keeping up its new products innovation
drive
We opine that one of OSIM International’s
(OSIM) core strengths lies in its ability to
constantly drive its product innovation. This
has allowed the group to enjoy gross margin
expansion (FY10: 65.3%; FY11: 68.9%;
1H12: 70.2%) from a more favourable
product mix, while enhancing its brand
profile with its novel new products with fresh
design concepts and better functionality.
During 3Q12, OSIM launched the uDivine App
massage chair, an improved version from its
earlier uDivine model. This chair enables
wireless connectivity to Apple Inc.’s mobile
devices; hence users can listen to ambient
music while having an array of 13 massage
programmes to choose from.
Not immune to macro slowdown, but
focusing on margin growth
Although we remain cognisant of the
concerns over the slowdown in China’s
growth engine which could affect consumers’
discretionary spending, we believe that
management would continue to improve its
productivity and rationalise non-performing
outlets besides its innovation drive to
mitigate this. OSIM’s entrenched presence
and experience in China would also allow it to
make more efficient and accurate operational
decisions, in our opinion. Hence we only
make some minor adjustments to our FY12
estimates (revenue: -1.1%; PATMI: -0.9%)
and also ease both our FY13 revenue and
PATMI forecasts by 2.2% as we input more
conservative assumptions.
Reiterating our BUY rating
We highlighted OSIM as a possible laggard
play during our 27 Jul 2012 report. Since
then, its share price has appreciated 13.9%
(even after going ex-div), strongly