DBS: Ezion offers a ‘bottom-fishing opportunity’ after selloff

Singapore two-dollar bills

Shares of Ezion offer a “bottom-fishing opportunity” after the “unwarranted” selloff since the stock resumed trading, DBS said in a note this week.

“We hold on to our view that Ezion is poised to re-rate from its current low valuation (which reflects insolvency),” DBS said, keeping a Buy call with S$0.29 target.

It pointed to potential catalysts from its successful refinancing exercise which gives the company a six-year runway on its debt. It also said improving utilization and day rates were driving an earnings recovery.

“We are more hopeful on Ezion’s turnaround,” it said. “While it has also been hit hard by the recent oil crisis, Ezion is among the few surviving players with a niche competitive edge in liftboats, a segment with brighter demand/supply outlook relative to other offshore support vessels.”

DBS noted that Temasek-linked pavilion Capital had boosted confidence by becoming a strategic investor, with other potential strategic partners possibly brightening the company’s prospects.

“Ezion remains in talks with strategic partners that could offer financial support or liftboat assets to tap the demand recovery,” DBS said. “We believe potential  tie-ups with prominent industry players enhances Ezion’s growth prospects, which would otherwise be constrained by its
high gearing level. This serves as a catalyst for further re-rating.”

The stock resumed trade in April after being suspended since August amid a restructuring program.

DBS said Ezion’s first quarter loss was expected, noting that excluding one-offs, the net loss was around US$15 million.

The stock ended Tuesday at S$0.12.