This Week’s “Falling Knife”: Ezra Holdings

EzraWhat goes down can fall further. That has been the story at Ezra Holdings (SGX: 5DN) this year. Shares in Singapore-based oil services outfit have tumbled from a high of S$1.35 at the start of 2013. This week, they fell another 7% to S$0.89.

The company, which provides offshore oilfield services, said third-quarter profits fell 42% to US$16.4m, even though revenues climbed 19% to US$317m. The company said its offshore support services division, EMAS Marine, had been affected by eight offshore vessels being off hire.

Meanwhile, its EMAS AMC division, which provides subsea services, had been hurt by delivery delays. It also said it had to recognise unexpected costs for certain projects. That said, Ezra stressed that it is confident the legacy issues, following its acquisition of Akers Marine to form EMAS AMC in 2011, is now behind it. Additionally, it expects the subsea division to be profitable in the third year of its three-year growth plan.

The company also reported a strong order book, which it said totalled US$2 billion. It said a large proportion of the contracts continues be secured by the Subsea Services Division. In a quick snapshot of the oil services landscape, Ezra said there are increasingly strong signs of resurgence in the Gulf of Mexico and opportunities in connection with Malaysia.

For the nine months to date, revenues are up 28% to US$842m but profits are down 12% to US$50.5m. The business is valued at 0.6 times last year’s sales; 0.6 times book value and 10 times historic earnings. None of the valuations look too demanding. However, according to Capital IQ, it has a net debt of US$1 billion.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.