SINGAPORE (Nov 30): Maybank Kim Eng is maintaining its “buy” call on Ezion Holdings with an unchanged price target of 42 cents, after attending the liftboat operator’s recent non-deal roadshow (NDR) meeting in Hong Kong.

In a Wednesday report, analyst Yeak Chee Keong says he continues to believe that Ezion will be an early beneficiary in the oil cycle after oil producers.  

According to him, investors at the NDR meeting “unsurprisingly” expressed their concerns about whether or not the worst was over for the oil and gas (O&G) sector; Ezion’s asset-write-down potential; as well as the company’s balance sheet sustainability and cash flows.

He highlights that Ezion has mapped out three paths for itself to navigate the O&G downturn and raise the sustainability of future asset deployment.

These are namely the continued diversification into windfarm installation, assert conversion to offshore product units to serve clients’ longer-term extraction needs, as well as capex revisions to ensure value addition.

Ezion’s 3Q results commentary has also hinted at the possibility of its cancellation of future projects that are no longer economically viable, recalls Yeak, who believes this is a “sensible move to prevent destructive capex and preserve balance sheet” although it may dampen the company’s earnings growth.

“We think that stock-specific catalysts could come from sequential earnings per share (EPS) growth from contributions from five new assets by 1H17; better receivable collection; cashflow relief from any extension of term loans by banks; and any government aid to the sector,” he asserts.

“Risks to our forecasts include asset impairment and contract deferments or cancellations.”

As at 2.40pm, shares of Ezion are trading 1 cent lower at 34 cents.