Singapore’s Big Loser of the Week: Ezra Holdings Limited

Credit: hobvias sudoneighm

Ezra Holdings Limited (SGX: 5DN) is this week’s big loser with its 21.7% weekly plunge to S$0.072 at end-Friday. For some perspective, the market barometer, the Straits Times Index (SGX: ^STI), fell by a much milder 4.4% over the same period.

Ezra, which was founded more than two decades ago, is an offshore contractor and provider of integrated offshore solutions to the oil and gas industry. Its three main business divisions are Subsea Services, Offshore Support and Production Services, and Marine Services.

On Thursday, Ezra announced its earnings for its fiscal first-quarter, the three months period ended 30 November 2015 (1Q 2016).

Revenue for the period went up 19% year-on-year to US$152.3 million, mainly on the back of improved performance from Ezra’s Marine Services division. The growth in the division was partially offset by a decline in sales from the Offshore Support and Production Services division, which came from “general weakness in the offshore industry” and “seasonal fluctuation as a result of monsoon in Asia.”

The higher top-line did nothing for the bottom-line however, as Ezra experienced its first-ever net loss since listing in 2003. The bottom-line for 1Q 2016 was a negative US$53.7 million, as compared to 1Q 2015’s profit US$60.6 million. A significantly compressed gross margin (from 22% to 10%), along with a huge 75% spike in administrative expenses had been major culprits.

Ezra’s balance sheet has also deteriorated slightly from a year ago. In 1Q 2015, Ezra had net-debt of US$1.10 billion (US$1.47 billion in borrowings vs. US$378 million in cash & equivalents), as compared to a net-debt of US$1.13 billion (US$1.215 billion in borrowings vs. US$83 million) in 1Q 2016.

Lionel Lee, Ezra’s chief executive and managing director, had given the following comments in the earnings release about the firm’s results and current business environment:

The global oil & gas industry continues to be challenging for the offshore marine and subsea companies. The volatility of the oil price and the depressed state of the oil and gas industry has led to reduced activity and uncertainty in new contract awards.

Like other oil and gas support services companies, we are currently working in opposition to industry tide and against difficult market conditions during this down cycle.

He added that FY2016 will be a difficult year for his firm and that Ezra will “focus on improving vessel utilisation and project execution as well as winning contracts.

Ezra is now selling for just 0.14 times its latest net asset value of US$0.454 per share.

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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 Sudhan P doesn’t own shares in any companies mentioned.