SINGAPORE (May 15): UOB KayHian is maintaining its “hold” call on Ezion, recommending investors enter at 28 cents and exiting at 33 cents.

Ezion had previously guided for an operational recovery to take place within 2Q17. However, after its 1Q17 results announcement, it appears that this guidance will now have to be pushed back.

“The risk of the operational recovery slipping into late 2H17 is high, as the situation on the ground is fraught with uncertainties,” says analyst Foo Zhi Wei in a Monday report,
“The fluidity of the situation renders any guidance out of date in a matter of weeks, and we are concerned that the current guidance will change again in the coming quarter.”

As forewarned, Ezion reported a headline net loss of US$12.7 million for 1Q17. Excluding the forex loss of US$13.3 million, core earnings reported a barely profitable quarter of US$0.5 million.

“The weak 1Q17 came in within our expectations, as we had anticipated a 1Q17 comparable to 4Q16 before the start of its operational ramp-up in 2Q17,” says Foo.

“The weaker core earnings in 1Q17 was due to a 16.4% y-o-y decline in revenue as the number of vessels fell by one to 14 vessels.”

But Ezion still managed to main a robust EBITDA margin of about 59% despite the weak bottom-line results.

The group’s net gearing went up to 100% due to currency translations and the lower equity base. According to Foo, Ezion made a net debt repayment of US$21.7 million in 1Q17 and management intends to continue paring down debt over the coming quarters.

Shares of Ezion are currently trading at  30 cents.