SINGAPORE (Aug 15): DBS is downgrading Ezion Holdings to “fully valued” with a lower target price of 13 cents.
This comes after the offshore services provider reported 2Q17 results missed estimates as utilisation remained low at 54% and charter rate continue to slide despite improving oil prices.
See: Ezion suspends shares, seeks restructuring
See also: Ezion sinks into losses in 2Q and 1H; calls for temporary suspension of trading
“The sudden deterioration of cash balances to US$93 million from US$187 million in 1Q17 and the turn of operating cash inflow to outflow in the quarter raise red flags,” says analyst Ho Pei Hwa in a Tuesday report.
“The high net gearing of 1.0x, tight credit access, and unexpectedly slow pick-up in business dampen Ezion’s ability to secure refinancing,” adds Ho.
The turn of events have prompted management to take proactive measures to explore financing options with its stakeholders.
“Investors should wait for more clarity on the resolution as a successful exercise will help the group pull through this prolonged downturn stronger, and vice versa,” says Ho.
Ezion says it will work together with all its stakeholders including lenders and creditors to discuss financing options in view of the current operational challenges that will threaten the fundamental viability of Ezion’s business if they persist. The move should enhance survivability of the group.
Ezion will also be meeting all its major bankers soon to finalise details after their initial discussions. Following that, informal meetings with creditors might also be scheduled to gather feedback before launching a formal one. But this process might take several months, says Ho.
Shares in Ezion were trading at 19.7 cents before they were suspended until further notice.
