Tuesday, 28 March 2017

Stock Market Today:Ezion acquires existing JVs & assets in efforts to improve earnings

SINGAPORE In a bid to improve its long-term earnings and reduce costs, Ezion Holdings has acquired its remaining 50% equity stakes in existing joint venture (JV) companies Strategic Offshore (SOL) and Strategic Excellence (SEL) for $3.5 million and $1.5 million respectively.

For the purpose of acquiring certain assets from the subsidiaries of SOL, the group has also established three wholly-owned subsidiaries in Labuan, Malaysia, for US$2 ($2.80) each, namely Teras Atlas (TAL), Teras Fortuna(TFL) and Teras Orizont (TOL) - all three of which are principally engaged in rig owning and the provision of rig services.

Through the three new subsidiaries, Ezion will be acquiring a vessel, charter contract and receivables each from SOL's subsidiaries GSP Atlas Limited (GAL), Strategic Fortuna (SFL) and GSP Orizont (GOL) for the respective sums of US$18.7 million, US $24.5 million and US$18.7 million, in addition to charter and payment guarantees from GAL and GOL.

In a Tuesday premarket announcement, Ezion says it intends to utilise the assets owned by the JV companies by working closely with their existing customers - in addition to improving the group's earnings in the long-term by, amongst other things, working towards cost-reduction through the realisation of economies of scale with its own fleet of assets.

While the Malta-incorporated SOL is an investment holding company and does not have an estimated carrying value of Ezion's 50% equity, SEL is incorporated in the Bahamas and its remaining 50% equity interest has an approximate carrying value of $5.2 million as at Dec 31, and is principally engaged in rig owning and chartering.

Both companies are JVs between Scott and English Energy (S&E), a wholly-owned subsidiary of Swissco Holdings, as well as Ezion Holding's subsidiary, Ezion Investments (EIPL).

Ezion explains that as SOL and SEL were not able to meet their obligations partially due to the "financial situation" faced by EIPL's joint venture partner S&E, the JV companies have not been able to operate effectively and therefore its purchase was necessary to ensure their continued operations and engagement with their existing customers.

The transactions will be funded through bank loans and international resources of Ezion, says the group, and are expected to have an impact on the company's financial statement in FY17.

Assuming that the acquisitions had been effected on Dec 31, Ezion's net asset value (NAV) per share would increase from 63.43 cents to 63.60 cents. Should they have been effected from Jan 1, 2016, Ezion's basic loss per share for the year ended Dec 31 would narrow from 2.30 cents to 1.40 cents.Shares of Ezion closed flat at 33 cents on Monday.

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