Ezra Holdings

1QFY11 above expectations

Ezra's 1QFY11 earnings came in 33% above consensus estimates. We believe

the company will see significant growth starting 3QFY11 with contributions from

the four PSVs and DP3 vessel. Maintain Buy, target S$2.20.

1QFY11 earnings were above consensus and in line with our numbers

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by about 30%, driven by the 25% yoy growth in revenue as its existing fleet continues to

operate at near-capacity, and sustained high profit margins.Ezra’s 1QFY11 (Sep-Nov 2010) operating profit rose 40% yoy, beating Bloomberg consensus

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to the US$7m decrease in JV and equity method gains, as well as the US$3.5m increase in

interest expenses from increased debt.Net profit came in 33% above consensus, reporting a 28% decline yoy. This was mainly due

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Ezra will be able to meet our full year forecast as earnings will start to improve significantly in

2HFY11 (see next paragraph).Although the net profit run rate versus our full year forecast is only 14%, we are positive that

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believe this may be short-lived and is less of a concern than during the difficult financial

markets of 2009.Ezra’s receivables days increased to 260 days in 1QFY11 vs 243 days in 1QFY10, but we

Ezra should see significant earnings growth starting 3QFY11 (Mar-May 2011)

! The CFO says 3QFY11 should see significant growth in earnings for two reasons:

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While two PSVs have been acquired, two are still under construction at a yard in Poland.

These have secured three-five year contracts at day rates of over US$20,000 and are being

bank financed (US$120m in total). Gross profit margins on these PSVs are very high at 60%

versus a blended 35% for Ezra’s offshore support division. Ezra expects the vessels to

contribute US$10m to net profits (13% yoy 2011F earnings contribution).1) The 4 platform service vessels (PSV) that Ezra purchased this year will be fully deployed.

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Engineering’s subsidiary) Singapore yard and will be deployed in FY2Q11 (Dec-Feb 2011) on

two consecutive one-two month subsea installation projects in Asia. Implied day rate is over

US$150,000, as expected, and much higher than Ezra’s blended average day rate of around2) The long-awaited DP3 heavylift construction vessel being finished off at ST Marine’s (ST