Would Benjamin Graham Buy Ezra Holdings?

Ezra Holdings Limited (SGX: 5DN) is a company with many of the hallmarks of a value share.

It is one of many companies related to the oil and gas industry that have taken a tumble along with the global oil price. Whilst it is not directly involved in the production ad extraction of natural oil and gas, Ezra provides integrated offshore services to companies that are.

The company hit its 52-week low of 39 cents a share on 19 March. This is roughly one third of the highest value the company reached in the same period. That was in July last year when the price stood at more than S$1.20 a share.

The tumbling share price has left the company with an earnings multiple of 25%. For a company that looks set to post year-on-year increases in net income that would seem to suggest the price could be unfairly low. Adding to the encouragement is that the company, following negative cash flows from its operations in the three previous years, posted positive operational cash flow in 2014.

A price to book value of just 0.3 could also suggest that the company might be priced too low. That could imply a significant margin at the current price.

It should be noted that along with continual growth in its top line, Ezra has grown its asset too. This could have because the company does not pay a dividend, which gives it more room for reinvestment. Slightly worrying could be the weak current ratio of just one.

Ezra is cheap. But it also operates in an uncertain industry. The question that investors need to ask is whether the potential rewards more than compensate for the risks involved.

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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 Adam Kuo doesn’t own shares in any companies mentioned.