Ezion's fleet to balloon to 21 units by 2015

Thanks to a new liftboat.

According to OSK, Ezion announced a Letter of Intent (LOI) from a South East Asian state-linked company to provide a liftboat for four years.

The LOI is valued at US$116.8m and will be deployed in 1Q2015. We view the news positively but impact on earnings will only be felt from FY15 onwards.

US$116.8m charter contract for four years. Ezion has secured a Letter of Intent (LOI) from a South East Asian state-linked company to charter a liftboat.

Here's more from OSK:

This is a new customer for Ezion. The bareboat LOI has a primary charter period of three years plus option for one more year. The newbuild liftboat will be based on a new generation design by Levingston.

As one of the requirements in the LOI, the liftboat has to be built at a state-owned shipyard in the country of operation. Ezion will sign a turnkey contract with the shipyard.

US$110m capex for the new liftboat. The capex will be financed using US$27.5m equity and US$82.5m debt. The equity portion will be paid in the next six months while the balance will be paid upon delivery of the asset in 4Q2014.

The new liftboat will increase Ezion’s fleet to 21 units by 2015. The fleet will be a mix of 11 service rigs and 10 liftboats.

We estimate US$16m net profit contribution p.a. from FY15 onwards. We estimate the bareboat LOI to generate an annual net profit of US$16m. Our assumptions are based on an annual revenue of US$26.3m (90% uptime), depreciation over 20 years, 5% effective interest rate and 2% withholding tax (on revenue).

Our calculation implies an attractive project payback (unlevered) of 5.0 years.

Fund raising via perpetual securities and sale-and-leaseback. Ezion is positioning its balance sheet for more jobs and management is exploring several fund raising options including the issuance of more perpetual securities and sale-and-leaseback.

Since the issuance of the S$125m 7.8% perpetual securities back in Sept 2012, Ezion has won US$549m new charters (including Ezion’s portion in two JVs).

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