The Three Numbers That Submerge Ezra Holdings

Being in the right place at the right time can do wonders for a company’s share price. But being in the wrong place at the wrong time can be a painful experience.

As a provider of equipment and solutions to the offshore oil and gas industry, Ezra Holdings (SGX: 5DN) was in the right place at the right time, once.

The market value of the company climbed from around S$280m in 2009 to about S$1.5b in 2013 when oil prices were high. But falling crude prices wipe out nearly S$1b from the company’s value – faster than you could say West Texas Intermediate.

The company’s Return on Equity has also come under pressure. In 2010 it was 15%. By 2012, it had fallen by half to 7.3%. Last year it was only 4.1%, which is around half that of Singapore’s mid-caps.

Ezra Holdings is profitable, but not excessively so. Its Net Income Margin (NIM) of 3% would suggest that the company makes S$3 on every S$100 of sales. That falls some way short of the median NIM for Singapore’s midcaps, which is around 29%.

That said, Ezra is quite efficient in the use of its assets. Its Asset Turnover of 0.47 is more than twice that of Singapore’s mid-sized companies. It is almost on level par with Singapore’s blue chips. The median Asset Turnover of the 30 companies that make up the Straits Times Index (SGX: ^STI) is around 0.5.

The oil services company does make use of leverage. It has S$2.4b of total liabilities and S$3.8b of total assets. That translates to a Leverage Ratio of 2.8, which is higher than the market average of 1.6.

By disassembling Ezra Holding’s Return on Equity, it is easy to see why there is a sinking feeling. Its Return on Equity of 4.1% is the product a low Net Income Margin of 3.1%; an efficient Asset Turnover of 0.47 and a hefty Leverage ratio of 2.8.

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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.