Ezion downgraded by DBS after profit warning dampens turnaround story

U.S. one-dollar currency notes; taken September 2018.U.S. one dollar bills.

DBS downgraded Ezion to Hold from Buy and slashed its target price to S$0.06 from S$0.14 after the company issued a profit warning last week.

The bank said it had been expecting a sequentially narrower net loss of around US$15 million for the fourth quarter, compared with an around US$20 million loss in the third quarter.

“However, it seems that the losses could now be wider as management guided for potential impairment on shareholder loans to joint ventures in view of the challenging operating environment,” it said in a note last week. “There could also be an adjustment to reflect a reduction in fair value of vessels.”

It also noted that management had said loan agreements which were supposed to be completed by the end of 2018 were still being finalized, with the funding delays severely impacting vessel deployments. That left seven units out of a total 12 in operation until the financing issues get resolved, DBS noted.

It had forecast 2018 net profit of US$4 million on revenue of US$124 million.

“We remain hopeful on Ezion’s turnaround, though this has been taking longer than expected,” DBS 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 better demand/supply outlook relative to other offshore support vessels.”

Shares of Ezion ended Friday down 4.26 percent at S$0.05.

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