Ezion Holdings
More Positive News On The Horizon
Ezion has just begun supplying and operating vessels for its A$350m Gorgon contract. However, we believe it is already in good standing to secure further contracts for Western Australia’s overall development of its offshore gas fields. Besides future phases for Gorgon, Ezion could be in the running for other adjacent gas field projects such as Wheatstone.
Wheatstone Gets A Major Boost
In the biggest energy deal in Australia’s history, Chevron has recently signed a US$82b contract to supply over 4m tonnes p.a. of liquefied natural gas to Tokyo Electric over the next 20 years from the Wheatstone field, and to also sell a 11.25% stake in the project. This deal essentially puts the overall Wheatstone project firmly on track to be launched shortly.
Ezion Has The Inside Track
To meet its target for production around 2013 for Wheatstone, Chevron has started front-end engineering and design work, with a projected budget of US$5b. Through its involvement in Gorgon and working relationship with Chevron, we believe Ezion is poised to secure vesselsupply contracts from the initial phase of this project in the near future.
Liftboats On Schedule And Will Be The Initial Kicker To Earnings
Ezion’s first liftboat is on track to be delivered by year-end. While this is later than the original anticipated delivery in November, the delay was caused by the late arrival of equipment from the US. Management does not expect more delays. Ezion is already looking for further liftboat opportunities such as in the North Sea, where day-rates could be as much as double the expected rates for regional contracts.
Despite High Growth Expectations, Assumptions Are Conservative
Ezion’s business model depends heavily on vessel financing. Ezion is considering other financing options such as sale-and-leasebacks in order to better manage its capital, and is speaking to potential buyers from the Middle East and Norway. Our projection for a 3-yr earnings CAGR of 58.9% remains intact. This is still conservative, as potential new contracts have not been factored in as yet. We maintain our BUY recommendation to $0.99 on a FY10 multiple of 15x. PEG stands at just 0.30x.
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