OIR BITES: Ezion's 4th major LNG contract in Australia

Stock Name: EzionHldg
Company Name: EZION HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.13

OIR BITES: Ezion's 4th major LNG contract in Australia 2 Aug 2012

Dear TRs, We attended Ezion's briefing this morning and here are some takeaways: - Ezion has won its 4th major LNG related project in Australia (3rdone in Queensland): o Gorgon LNG o QCLNG 1 - commences Jul 2012 o Curtis Island 2 - commences Feb 2013 o APLNG (today's announcement) - commences 2Q13 - The contract value is about US$71m for logistics and support services to haul equipment and modules for the development of LNG facilities in Queensland, Australia. o Work will carried out over 20+ months, translating to about US$35m in revenue per year, slightly higher than Ezion's previous projects. o This is related to the development of two LNG trains - there is a likelihood that the budget for two more trains (trains 3 and 4) will be approved as well, like the Gorgon LNG and earlier QCLNG projects. This could mean more work for Ezion subsequently. - Five to six sets of vessels (tugs, barges) will be required, and capex of US$90m is similar to Ezion's earlier projects o The group currently plans to charter the vessels, but will not rule out the possibility of going "full capex" later as the vessels may be used for other similar projects in Australia that may come up down the road. o We expect about 20% net profit margin initially for the group, which may trend upwards to about 30%+ in later stages - We view this latest development positively as: o It shows the group's ability to secure projects of similar nature (in terms of work scope and margins) in quick succession, and illustrates its close relationship with the oil majors who are its customers o We expect more tenders to come up as given Australia's buoyant LNG scene and Ezion is well-placed to secure them, although the group is likely to focus on projects on the Western or North Western side of Australia (e.g. Wheatstone) after clinching several Eastern projects. This contract is expected to increase our FY13 earnings estimate by about 9%, but as Ezion will be announcing its 2Q12 results either Tue or Wed next week, we hold off adjusting our estimates till then. Maintain BUY with S$1.13 fair value estimate.

Warm regards,

Company Registration No: 198301152E