SINGAPORE (Sept 1): UOB Kay Hian has maintained its “hold” recommendation for Ezion Holdings despite the latter announcing its share of results from associates and joint ventures would fall by US$11.7 million ($16 million) in 2Q.

According to Ezion, the impairment arose from the difference between the management account and the published full year accounts of one of the group’s associates. As such, Ezion’s 2Q earnings will decrease 59% to US$8.1 million.

In a Thursday note, UOB Kay Hian’s Foo Zhiwei and Andrew Chow believe that the associate in question is 17.8%-owned Ausgroup, but added that the difference is an accounting non-charge and will not affect the group’s operational cashflows.

“Fundamentally, Ezion’s outlook remains unchanged with continued difficulty in fully deploying its service rigs in the face of the current downturn,” said Foo and Chow.

While the change also reduces the group’s equity by 1% to US$1.28 billion, the group’s net gearing ratio increases marginally from 1.2 times to 1.21 times, adds the duo.

To that end, UOB Kay Hian has maintained its FY16 core earnings forecast of US$52 million, but reduced its FY16 reported earnings forecast from US$65 million to US$52 million. Its forecasts for FY178 and FY18 were also maintained.

Foo and Chow also adds that they see little share price upside as earnings from future deployments for FY16 and 1HFY17 have already been priced in, and is reducing the target price for Ezion to 23 cents from 31 cents previously to reflect the lower 0.3 times FY17 earnings benchmark that its peers are currently trading at.

Shares of Ezion are trading 4.6% lower at 21 cents.