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New Private Placement for Ezion Holdings: What’s In It for Existing Shareholders?

The offshore oil & gas support industry seems to be gathering interest from investors yet again.

First, there was the recent proposed-listing of PACC Offshore Services Holdings (POSH), an offshore support services provider controlled by Malaysia’s richest man, Robert Kuok. Then, it was revealed last week that another Malaysian magnate had bought a stake into Ezion Holdings (SGX: 5ME), one of Singapore’s largest offshore support services provider and vessel owners.

The private placement

Indirect subsidiaries of Hong Leong Co (Malaysia) Berhad would be buying 100 million new shares of Ezion Holdings in a private placement at S$1.94 each; for comparison, Ezion Holdings had 1.205 billion shares outstanding prior to the placement. Hong Leong Co is controlled by Malaysian billionaire Tan Sri Quek Leng Chan, who’s related to Kwek Leng Beng, chairman of City Developments, one of Asia’s largest real estate outfits.

The placement is done at an 8.9% discount to the last traded price of Ezion Holdings before the announcement was made and the deal will make Hong Leong Co a 7.7% indirect shareholder of Ezion Holdings after it is concluded.

Tan Sri Quek is well-known for making noteworthy investments in many industries. Currently, companies controlled by or related to him have businesses that are involved with banking, finance, manufacturing, construction, property development, oil & gas and hospitality.

What’s in it for Ezion Holdings

Ezion is planning to use up to 90% of the proceeds on more capital investment to grow its business while the rest will be utilized for general working capital. This move comes on the back of the company being heavily indebted (at last count; total debt of US$1.09 billion with total cash of US$166 million) due to its aggressive expansion over the past few years.

Ezion currently owns one of the world’s largest and most sophisticated Multi-purpose Self Propelled Jack-up Rigs, otherwise known as “liftboats”. With help from the Hong Leong group, Ezion’s management expects that the company will be able to tap on a new network of investors and gain access capital to keep up with their growth-needs for at least the next 12 months.

Some of Ezion’s competitors in the market include Ezra Holdings (SGX: 5DN), Swiber Holdings (SGX: AK3) and Kreuz Holdings (SGX: 5RK).

In any case, Ezion’s investors seem to be reacting positively to the news, as its shares went up more than 4% to S$ 2.27 at the end of trading on 17 April 2014. At that price, the company is trading at a Price to Earnings ratio of 12.6 and a  Price to Book Ratio of 3.16.

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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 contributor Stanley Lim doesn’t own shares in any companies mentioned.