Ezion

Ezion: Religare INITIATES coverage with Buy Call and $2.15 TP. House note that Ezion has long been a member of the ASEAN Structural Investor and sits within its most favored space for offshore, i.e. services. Believe offshore services firms can benefit from the continued robust offshore spending outlook, without the risk of Chinese yards pushing down industry margins that rig builders face. Hence Ezion is in the right part of the offshore value chain for 2013. Ezion has a strong business model, in that it locks in 3-5-year time-charter contracts for liftboat and service rig vessels before building them. This allows the co to lock in earnings growth, only commit capital when it knows high returns will come, and most importantly avoid the risk of underutilizing its fleet. The ability to lock in contracts ahead of vessel construction is a testament to Ezion’s strong customer relationships and, in our view, an underappreciated strong point of the company. House initiate coverage on Ezion with a BUY rating and $2.15 target price. Value Ezion’s Self Elevating Unit (SEU) business segment based on DCF due to its locked-in recurring income, and the company’s logistics business at just 4x 2013E EBITDA. Our target equates to 12x 2013E PER and 2.5x 2013E PBV.