Ezion upgraded by UOB KayHian on expectations of post-restructuring recovery

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UOB KayHian upgraded Ezion to Hold from Sell on its expectations the successful restructuring can lead to a recovery and a potential re-rating of the stock.

“Post-restructuring, Ezion has six years’ time to generate sufficient cash flow to partly repay banks and security holders. Reduced interest expense and minimal debt repayment should facilitate this,” the brokerage said in a note on Monday. “However, as equity holders have no attributable cash flow for the next six years, and current valuation is high at 1.26 times 2018F price-to-book, we see no hurry to chase the share price.”

The brokerage said it expected Ezion to return to profitability, adding assuming complete deployment of its liftboats by 2020 and 70 percent utilization of eight service rigs, it estimated 2018-20 earnings at US$10 million, US$42 million and US$66 million respectively.

“However, this represents accounting profits with little to no attributable cash flow to equity holders as cash flow is set aside for debt repayment,” it said. “We expect share price to trend down towards its adjusted book value of 15.1 Singapore cents in the near term and we will only turn buyers at that level.”

It set a target price of S$0.18, up from its previous target of S$0.13.

The stock is expected to begin trading again on Tuesday.