Ezion Holdings - Valued entry into growth story

Ezion Holdings is a pure marine & offshore provider. It is involved in the provision of offshore marine logistics & support services and the development, ownership and chartering of strategic offshore assets such as Multi-Purpose Self-Propelled Jack-Up Rigs ("Liftboats"). It is the owner of the largest and most sophisticated class of Lifeboats in the world and one of the first to introduce the usage of Liftboats in Asia & Middle East.

Ezion Holdings's value is in their first mover advantage to own the world’s largest liftboats. This is due to its five-year exclusive building contract with US-based Levingston Inc. (expiring in 2013). Ezion’s liftboats are versatile offshore construction vessels that do equipment lifting for a wide variety of works at offshore oil fields and wind farms. Beside this, Ezion secured a contract to supply marine logistics vessels to US energy company Chevron for the first phase developmental work of Gorgon gas fields. The company is expected to bid for other sub-contract work related to the US$43bn Gorgon Project.

The financials also provide evidence of a growing company. For the year 2009 ended December 31, Ezion grew its revenue by 136.9% and its gross profit by 105.8%. At its current price of SGD $0.73, it is trading at a P/E ratio of 13.4. This is low as compared to P/E ratio of 53.66 and 23.19 in Year 2008 and 2009.

I favour Ezion based on the following:
1. business transformation via the high margin liftboats, at an estimated 4.2 years payback periods
2. ability to self-fund this liftboat business expansion using debt and internal cash flows
3. Experienced and strong management to establish Ezion to be global dominant liftboat company and capitalise in the opportunities that are present in the offshore oil and gas industry as well as the offshore wind farm development market

Ezion is expected to grow 50% in the next 5 years and based on the growth rate, the intrinsic value is $0.95 which represent a 32% margin of safety