Singapore Company Focus

Ezra Holdings
Bloomberg: EZRA SP

Reuters: EZRA.SI

DBS Group Research . Equity

6 Jun 2011

BUY S$1.52 STI : 3,145.67

Price Target : 12-Month S$ 2.20 Reason for Report : Post conference update Potential Catalyst: Contract awards Analyst Jeremy THIA +65 6398 7974 jeremythia@dbsvickers.com

Poised for a re-rating

Positioned for more orders amid buoyant subsea market. New charters in FY11 despite weak OSV market underscore its competitive strengths. Possible rationalization of non-core businesses to free balance sheet and reduce gearing. Maintain BUY, S$2.20 TP.

Price Relative
S$ 3.80 3.30 2.80 2.30 1.80 1.30 0.80 0.30 2007 21 2011 71 171 Relative Index 221

121

Positioning itself for more subsea orders. We note that 3 major subsea EPIC peers have posted robust 1Q2011 new orders, +89% y-o-y on aggregate, and see strong order momentum in the quarters ahead. This bodes well for Ezra as it positions itself to add to its current subsea backlog of US$276m, with AMCs integration on track, vessel fleet expansion and continued solid project execution. Offshore support business competitive strengths shine amid weak market. Despite the still challenging OSV market, Ezra has announced new charters for 12 vessels worth US$189m in FY11 YTD; its fleet utilisation rate of >90% is far superior vs. the global OSV fleet at c. 66%. We believe this underscores Ezras competitive strength of operating a diverse fleet of young, deepwater capable vessels. Rationalisation of business would free up balance sheet. The group plans to rationalize the business over the next 12 months, potentially divesting its non-core units to free up its balance sheet. This could raise c. US$150-200m cash for the group and reduce FY12 net gearing to 0.84-0.89x, without the need for new equity. Maintain BUY, S$2.20 TP. Confidence in AMC builds with the integration progressing on track, a growing subsea order backlog and successful execution of 2 projects recently. Ezra is well positioned to build up its order backlog, providing positive catalysts and enhancing earnings visibility going forward. No change to forecasts. Maintain BUY, TP of S$2.20 implies 45% upside.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Lionel Lee (%) Aker Solutions As (%) Free Float (%) Avg. Daily Vol.(000) 868 1,319 / 1,073 21.2 8.4 70.4 3,974

2008

2009

2010

Ezra Holdings (LHS)

Relative STI INDEX (RHS)

Forecasts and Valuation

FY Aug (US$ m) 2010A 2011F 2012F 2013F

Revenue EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts): Other Broker Recs:

354 97 79 76 70 13.3 12.2 (10) 13.3 1.5 103.8 11.4 12.5 11.5 13.8 1.0 1.5 0.8 13.5

487 111 65 58 67 8.3 9.5 (22) 8.3 0.8 121.8 18.4 16.0 17.7 17.2 0.5 1.2 1.0 8.0 10.4 B: 9

707 179 125 114 114 16.2 16.2 71 16.2 1.6 136.4 9.4 9.4 10.0 11.5 1.1 1.1 1.0 12.6 14.5 S: 2

922 183 147 129 129 18.3 18.3 13 18.3 1.8 152.9 8.3 8.3 10.4 11.8 1.2 1.0 1.0 12.7 17.8 H: 1

ICB Industry : Oil & Gas ICB Sector: Oil Equipment; Services & Dist Principal Business: Ezra is an integrated offshore solutions provider for the oil and gas industry in the Asia Pacific region.

Source of all data: Company, DBS Vickers, Bloomberg

www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: YM

Company Focus Ezra Holdings

Deepwater Subsea division to lead Ezras growth

Major subsea EPIC players record robust order intake in 1Q 2011 The major subsea EPIC players, namely, Subsea 7 SA (the merged entity of Acergy SA and Subsea 7 Inc), Saipem and Technip have earlier reported a sustained, high level of tendering activity. (For a more detailed analysis on the

Quarterly subsea order intake by major subsea EPIC players: sharp y-o-y and q-o-q pick up in order intake recorded by peers
US$ m 2,500 2,000 1,500 1,000 500 0 1Q2010 4Q2010 1Q2011 Subsea 7 SA Saipem (Engineering & Construction: Offshore) Technip (Subsea)

Q u a rte rl y o rd e r i n ta ke

deepwater subsea market, refer to our 5 April 2011 note on Ezra, More than the sum of its parts.) Our latest checks
reveal robust subsea order intakes in 1Q2011: this was up between 65-224% y-o-y and 6-40% q-o-q; on an aggregated basis, 1Q2011s order intake by the trio was US$5.0bn, +89% y-o-y and +27% q-o-q, leading to swelling order backlogs, up between 10-33% y-o-y. and continue to guide for robust order book momentum. Looking ahead, these players continue to guide for strong order book momentum in the coming quarters, underpinned by sustained high oil prices and high levels of tendering activities. A number of major SURF (subsea, umbilicals, risers, flowlines) contracts are expected to be awarded in 2011, with the offshore installation phase to commence in 2012 or later. Regions of high activity include Australia, Brazil, West Africa and the North Sea while activity levels in the Gulf of Mexico are also expected to pick up, following the resumption in the issue of drilling permits. However, timing of recovery remains uncertain. Sizeable backlog just 3 months from completion of acquisition. EMAS-AMCs announced order backlog currently stands at US$276m, up from US$254m as of midApril. This was due to the upsizing of the Noble Energy Tamar project by US$22m to US$110m from the expansion in work scope. If we were to include the US$32m LOI for the provision of subsea support services announced in April 2011, this will bring order backlog to US$308m a sizeable backlog in just 3 months following the completion of the AMC acquisition. Bidding for c. US$3bn worth of projects; maintains 12 months order backlog target of US$1bn. Notwithstanding the ongoing integration between the two companies, EMASAMC continues to actively bid for subsea construction and installation contracts globally, with c. US$3bn worth of projects under tender. Management remains confident in achieving its order backlog target of US$1bn within 12 months, which implies a >3x increase in order book from current levels if it materialises.

US$ m 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1Q2010

O rd e r b a c kl o g

4Q2010

1Q2011

Subsea 7 SA Saipem (Engineering & Construction: Offshore) Technip (Subsea)

NB: 1) Subsea 7 SAs numbers are proforma adjusted for the merger between Acergy SA and Subsea 7 Inc, which was only completed in January 2011. 2) Saipem and Technips numbers have been adjusted for different reporting currency (i.e. denominated in Euros but translated into USD).

Source: Subsea 7 SA, Saipem, Technip, DBS Vickers

Page 2

Company Focus Ezra Holdings

Ezra-AMCs outstanding announced contract backlog

Date announced Contract description / job scope Value (US$ m) 83 Customer ABB Period of execution 2012-2013 Vessel deployed AMC Connector; a state-of-the-art installation vessel uniquely equipped to install long, heavy power cables and subsea umbilicals. Comments The agreement also includes options for further campaigns over 2014-2016. ABB and Aker Solutions have also entered into a strategic cooperation agreement where the two parties have ambitions to combine their strengths within power cables (ABB) and installation services (Aker Solutions) in selected projects.

Projects secured pre FY2011 25-Mar-10 Charter of AMC Connector vessel to support ABB's installation campaigns in 2012/13 in Norway

Projects secured in FY2011 3-Jan-11 Mooring installation contract for hook-up of the Bourgogne FPSO, offshore Angola, Africa

30

MODEC Offshore Production Systems (Singapore) Pte Ltd.

2Q 2011

Likely one of the Boa vessels

MODEC will supply the PSVM FPSO to BP for the oil company's Pluto, Saturno, Vnus and Marte development in Block 31 offshore Angola. The FPSO will be installed in approximately 2,000m water depth and have production capacity of 157,000 barrels per day. This is an add-on contract for the installation of 106.5km of cable - in one length - stretching from Hammerfest, Norway, offshore to the Goliat FPSO. The subsea power cable, supplied by ABB, will weigh approximately 6,000 tonnes. AMC will also provide and install a permanent tether anchor for the subsea power cable.

3-Feb-11

Installation of subsea power cable for the Goliat field in the Barents Sea, Norway

12

ABB

2Q 2013

AMC Connector

1-Mar-11

14-Apr-11

Supply and install 55km of power cables along with associated terminations and ancillaries for the Gudrun field in the North Sea; located 55km of Sleipner and in water depths of 110m. Tamar Project - Install approximately 330km of umbilicals and subsea equipment, as well as deliver subsea suction piles and jumpers

41

Statoil

3Q 2013

AMC Connector

110 *

Noble Energy

2Q 2012

Boa Sub C, Lewek Toucan

The umbilicals and subsea distribution equipment for the Tamar Project are being manufactured by the Aker Solutions Group at its yard in Mobile, Alabama in the USA

Total announced backlog (US$ m)

276

* NB: The value of this project has been upsized from US$88m as announced originally on an expanded job scope. This figure excludes the US$32m LOI awarded to Ezra for the provision of subsea support services related to an undisclosed international oil majors maintenance activities for a floating storage facility in Africa.

Source: Ezra, DBS Vickers

Page 3

Company Focus Ezra Holdings

Positioning to take on more projects. We see several factors in play which we believe will set up EMAS-AMC well to build up its order backlog amid a sustained, robust outlook for subsea order flows. 1) Integration on track; combined entities to boast expanded capabilities against an enhanced asset base. The integration of Ezra and AMC remains on track, which will see the combination of AMCs capabilities and track record in the subsea EPIC/SURF market combined with Ezras larger and growing fleet of installation vessels covering all IMR and SURF installation segments (including flexible and rigid pipelay capabilities deployable in up to 3,500m water depths). This will enable EMAS-AMC to penetrate a market characterised by high barriers to entry on high technical complexity and high capital intensity. Indeed, the market is highly consolidated, with typically only 3 to 4 other players competing for the same contracts. 2) Strengthened management team. Ezra has appointed Mr CJ DCort as CEO of EMAS-AMC. Mr DCort is veteran of the industry with >30 years of experience and was most recently the CEO of SapuraAcergy, where he had amassed an order backlog of US$1.7bn with a single asset. His diverse

experience includes the offshore construction/ marine operations, engineering, platform, pipeline and subsea installations (shallow and deep water), project and corporate management. He also has an extensive track record of working with oil majors and national oil companies. 3) Expanding asset base to support expected build up in order backlog. The Lewek Crusader, a newbuild DP3 subsea construction vessel, was finally delivered in April, bringing the subsea fleet size to 3 units. By late FY11/early FY12, we expect the subsea fleet to grow to 6-7 units with the addition of another 3-4 vessels. These include the Lewek Ambassador (IMR vessel, currently under refurbishment), Lewek Falcon (newbuild deepwater multi-function construction vessel), Lewek Champion (heavy lift pipelay barge, currently deployed on a project till late FY11, to be bareboat chartered-in from EOC), and the Lewek Toucan (AHTS with deepwater installation and construction capabilities; to be re-designated to the subsea division following the conclusion of its current charter under the Offshore Support division). Delivery of the newbuilds AMC Connector in early 2012 and the Lewek Constellation in 2013 will provide further boost to the asset base, and will allow EMAS-AMC to build and execute a larger backlog.

EMAS-AMCs fleet of subsea vessels to become available progressively

Financial period Month Boa Deep C Boa Sub C Lewek Crusader Lewek Ambassador Lewek Falcon Lewek Champion Lewek Toucan AMC Connector Lewek Constellation Enterprise 3 Part of EMAS-AMC's subsea fleet * Option period Under construction / refurbishment Contracted period * J 4Q11 J A S 1Q12 O N D 2Q12 J F M 3Q12 A M J 4Q12 J A S 1Q13 O N D 2Q13 J F M 3Q13 A M J 4Q13 J A

* NB: Lewek Toucan is currently chartered out under the Offshore Support division; expect vessel to be re-designated to Ezra-AMCs subsea fleet by in 3Q2011 once current charter contract is completed. Lewek Champion is currently owned by Ezras associate, EOC Ltd. It is currently executing a pipelay and installation contract with Chevron in Gulf of Thailand; expected to be fully utilised until August 2011. Enterprise 3 is currently owned by associate, Perisai. It remains on a long term bareboat charter (4.5 years) to TL Offshore, a wholly-owned subsidiary of SapuraCrest Petroleum until mid-2013.

Source: Ezra, DBS Vickers

Page 4

Company Focus Ezra Holdings

4) Building on solid project execution track record. The recent successful completion of the Popeye project for Shell in the GOM and the installation of the Skarv FPSO for BP in Norway continue to build on EMAS-AMCs solid project execution track record. Ezra-AMCs recently executed projects
Project Popeye project Region Gulf of Mexico Client Shell Comments Deliver and install 40km of steel umbilicals to Shell's Popeye field in the GOM. This will connect subsea wells on the field in Green Canyon Block 116 in 2,200 feet of water to the Cougar fixed platform in South Timbalier Block 300, which stands in a water depth of 362 feet.

Offshore Support division remains a core business; targeting annual revenue growth of 10-20%
OSV market remains challenging overall. The overall AHTS market is still nursing a hangover from the newbuilding party of 2005-2010. Since 2005, this segment has seen 769 AHTS delivered, vs. 486 PSVs. The AHTS to rig ratio jumped from 2.3x in 2004 to 2.9x currently, driven mainly by the <8,000 BHP AHTS category. The increase in PSV to rig ratio was more moderate, at 2.5x from 2.2x over the same period. As such, it is not surprising that the utilisation rate in the global AHTS market continues to decline, at c. 68% as of end 2010, according to ODS Petrodata. For PSVs, the decline in global utilisation rates appears to have bottomed at around 72% at end 2010, likely due to a healthier demand/supply balance.

Skarv FPSO installation project

Norway

BP

Source: Ezra, Upstream, DBS Vickers

Tow FPSO from South AHTS utilisation rate continues on downtrend Korea to Norway for installation; largest FPSO to Gl o b a l AHTS a n d PSV h i s to ri c a l u ti l i s a ti o n ra te be deployed to the (%) Norwegian Continental 100% Shelf. 95%
90% 85% 80% 75% 70% 65% 60% 2005 2006 2007 2008 2009 2010 AHTS PSV

Subsea division to lead growth of the Ezra group. We project FY11/12/13F revenue for the Deepwater Subsea division of US$140m/US$294m/US$532m, on assumed subsea order wins of US$350m/US$500m/US$600m. This will underpin our projected 38% FY10-13 revenue CAGR for the Ezra group. Subsea revenue can be lumpy. Management guides that while the engineering work typically commences 6-9 months ahead of actual project execution, revenue recognition for subsea contracts will only commence once the vessels are mobilised to the project site. With actual project execution typically 3-4 months long, this makes revenue on subsea projects inherently lumpy. Note that for modelling purposes, we have assumed a recognition period of 18 months from date of contract award this is to take into account projects that commence at a later date. But cash flow impact generally neutral to positive. On cash flow, EMAS-AMC would typically receive 10-20% downpayment upon contract signing, and another 10-20% upon the mobilisation of vessels to the project site, with the remainder upon project completion. This ensures projects are typically cash flow neutral to positive.

Source: ODS Petrodata, DBS Vickers

Some bright spots for PSVs and large AHTS. The demand/supply scenario is also reflected in vessel day rates, with all classes of PSVs now fetching higher day rates vs. the recent trough. This is not the case across the whole AHTS market, with day rates for the <10,000 BHP category still languishing near the bottom. However, we note some bright spots for the larger vessels (i.e. >10,000 BHP), which have been fetching improved day rates. We believe this can be attributed to the healthier demand/supply balance vs. the smaller AHTS categories, with vessel to rig ratio of 2.4x (>8,000 BHP AHTS) vs. 3.2x (<8,000 BHP AHTS).

Page 5

Company Focus Ezra Holdings

Day rates for global PSV term fixtures

We expect this to be led by the >8,000 BHP sized categories as E&P activities move into more demanding environments, supported by a healthier demand/supply ratio of 2.4x AHTS (>8,000 BHP) per rig (floater) vs. 3.2x for the smaller AHTS (<8,000 BHP) category. Ezra well positioned to benefit from recovery in OSV market. 1) Young fleet averaging 4 years old. Ezra boasts a young offshore support fleet averaging 4 years old, vs. the industry average of c. 17 years. We believe this is a significant competitive advantage as the continued delivery of newbuilds from the yards into an already saturated market enable end users to choose from a wider pool of available assets, favouring younger, more reliable tonnage and resulting in the idling of old tonnage (i.e. 20 years and older). Further, older assets could present a greater possibility for equipment failure and compromise safety during operations offshore. Younger vessels, on the other hand, are less prone to technical issues which can lead to costly vessel downtime and high maintenance and repair costs. This translates into high efficiency and utilisation rates for both the vessel owner and charterer. Indeed, data from ODS Petrodata reveals a growing divergence in utilisation rates between younger and older vessels, similar to what has been observed in the rig market (refer to our 10 March 2011 Offshore & Marine report Offshore on the radar). 2) Focus on deepwater capable assets. Around 70% of Ezras fleet is deepwater capable, vs. 29% of the global AHTS fleet. Its fleet of 30 AHT/AHTS/MFSV averages c. 9,645 BHP, with 18 units >8,000 BHP capacity. More recently, Ezra took delivery of its first newbuild MFSV, Lewek Fulmar, from the yard on 25 April 2011. It is the worlds first multifunctional ultra deepwater AHTS of the UT788 CD design, which also achieved a record-breaking bollard pull of 402.4 tonnes. We understand that it has also been deployed on term charter. We believe Ezras focus on deepwater capable assets positions it well to leverage on the broader industry trend which is gravitating towards E&P activities in deeper waters and harsher environments.

Source: ODS Petrodata

Day rates for global AHTS term fixtures

Source: ODS Petrodata

Demand for OSVs expected to grow across 2011, in line with higher projected rig count. We use contracted offshore rig count as a proxy for OSV (both AHTS and PSVs) demand. According to data from ODS Petrodata, the demand for offshore rigs (jackups, semisubmersibles and drillships) is projected to grow by 93 units by end 2011, representing a growth of 18% from current levels. We believe this will underpin near term growth in demand for OSVs. PSV market to pick up ahead of AHTS. We believe any pickup in demand for OSVs will have a more significant impact on the PSV market vs. the AHTS market given 1) the current healthier demand/supply balance of PSVs to rigs (2.5x), vs. AHTS (2.9x); 2) smaller orderbook to existing fleet (10.9% vs. 12.2% for AHTS); and 3) more staggered delivery profile of the outstanding orderbook across 2011-2014. We expect a more significant recovery in AHTS demand from 2012 onwards, as the market continues to digest the additional capacity still being delivered from the orderbook.

Page 6

Company Focus Ezra Holdings

Delivery profile of the outstanding PSV orderbook

120 100 No. of ve sse ls 80 60 40 20 0 2011 <2,000 dwt 2012 2,000-3,000 dwt 2013 3,000-4,000 dwt 2014+ >4,000 dwt

3) Expanding PSV fleet to meet growing popularity in Asia Pac. In addition to the better demand/supply balance of PSVs vs. AHTS, data from ODS Petrodata reveals that PSVs are becoming more widely used in Asia Pacific, accounting for 13% of global term demand vs. just 7% 10 years ago. Ezra has grown its fleet of PSVs to 6 units currently, in a span of around 12 months. In addition to these existing units and the two 5,200 dwt PSVs being built by Remontowa in Poland, the group is building another two 3,200 dwt PSVs, with scheduled delivery in 2H2012. These will expand Ezras PSV fleet to 10 units by end 2012. We understand these 2 units will not have any capex implications as they will be bareboat chartered in under sale and leaseback arrangements. New charters for 12 vessels in FY11 YTD underscore Ezras competitive strengths in the offshore support segment. Despite the still challenging conditions in the OSV market, Ezra has secured new charters for 12 vessels in FY11 YTD worth a total of US$189m. These charters cover 6 AHTS and 6 PSVs for deployment across the Asia Pacific region and have a blended average charter duration of >2.7 years, vs. the overall charter duration of c. 3 years for the fleet. Indeed, Ezra continues to post superior fleet utilisation rate of >90%, vs. ODS Petrodatas estimate of current global OSV fleet utilisation at c. 66%. We believe this underscores Ezras competitive strengths of operating a diverse fleet of young, deepwater capable vessels. Targeting stable 10-20% annual revenue growth for the Offshore Support division. Going forward, the Offshore Support division will remain a core business of the group. However, given that this part of the business is more mature, the group is targeting a more stable annual revenue growth of 10-20%. We believe this is not unreasonable we project y-o-y growth of 18% / 14% / 12% across FY11/12/13F, supported by an expanded fleet with 8 additions in FY11 (5 PSVs, 2 AHTS, 1 MFSV), 2 newbuild PSVs in FY12 and another 2 PSVs in FY13.

Source: Clarksons, DBS Vickers

Delivery profile of the outstanding AHTS orderbook

250 200 No. of ve sse ls 150 100 50 0 2011 < 4,000 bhp 2012 2013 8,000 - 12,000 bhp 2014+ > 12,000 bhp

4,000 - 7,999 bhp

Source: Clarksons, DBS Vickers

Growing divergence in utilisation rates between younger vs. older vessels

Fabrication yards to play supporting role, help manage groups costs.

Yards to play supporting role, help manage groups costs. Going forward, Ezra guides that its fabrication business will play a more complementary role in the group. The yards will be used to support the groups subsea and offshore support divisions, executing repair and maintenance (i.e. the mandatory vessel surveys and dry dockings) for Ezras

Source: ODS Petrodata

Page 7

Company Focus Ezra Holdings

vessels as well as serving as a mobilization and logistics base. This is expected to enhance cost control for the group overall. Flattish revenue to be expected. While being a complementary business, the yards will continue executing third party fabrication contracts. However, management has guided for flattish revenue from this division (booked under Marine Services). We estimate the yards orderbook as of end 2Q11 stood at c. US$200m, with around FY11 YTD order wins of US$90-120m vs. our order wins assumption of US$130m for FY11.

Net gearing could be reduced within internal threshold without requiring any capital markets exercise to raise new funds. Assuming the rationalization process is completed in FY12 with no gains from disposal, we estimate net gearing could be reduced to 0.84-0.89x from our 1.04x projection. This would bring net gearing down to within Ezras internal threshold, without needing to tap the market for more funds.

Financials and valuation

Earnings visibility on EMAS-AMC is weak in near term, but improves in the medium term. Earnings visibility on EMAS-AMC is weak in the near term but improves in the medium term as order backlog builds. We estimate that 34%/70%/12% of our revenue projection for EMAS-AMC over FY11/12/13F is backed by its US$276m announced subsea order backlog. Revenue projections for EMAS-AMC: earnings visibility improves in FY12
US$ m 500 400 300 200 100

Capex requirements funded

Outstanding capex of US$380m. Ezras committed capex plan calls for another US$80m to be incurred in 2H11, and US$150m each in FY12 and FY13. This will be for outstanding amounts for Lewek Falcon and the AMC Connector, the 2 newbuild PSVs at Remontowa, and the Lewek Constellation. Management guides that there is no more significant capex plans beyond current commitments. Funding for Constellation secured. The newbuild Lewek Constellation will be Ezras second DP3 subsea construction vessel with ice-class, deepwater subsea multi-lay, heavy-lift capabilities. Construction is underway, with delivery scheduled for 1Q2013. Total capex for this asset is c. US$400m, of which 75% will be debt funded. We understand that funding for the asset has been secured.

Possible rationalization of non-core businesses could free up balance sheet, reduce gearing
Possible rationalisation of non-core businesses could raise cash proceeds US$150-200m. Net gearing currently stands at 0.90x, and is projected to increase to 0.98x by end FY11. While debt covenants in place allow a net gearing ceiling of 2.5x, management intends to keep this below 1x. To this end, management has been guiding that it is looking towards rationalizing its businesses, focusing on those in which the group has the potential to be a leading player within the industry (i.e. the offshore support and deepwater subsea businesses), while potentially divesting (partial or fully) those in which is unlikely (i.e. the yards and the energy services units). This rationalization process is expected to be executed over the next 12 months, and could raise cash proceeds of US$150-200m for the group.

0 FY11F Announced orders FY12F FY13F Assumed orders

Source: Ezra, DBS Vickers

No change to numbers, introduce FY13F. We have kept our FY11/12F estimates and introduce our FY13 projections. We expect FY12/13F growth of 71%/12% to be underpinned by 1) AMCs return to profitability on a larger expected subsea order backlog and an expanded offshore fleet; and 2) higher associate/JV contributions with full year contributions from the Chim Sao FPSO project.

Page 8

Company Focus Ezra Holdings

BUY maintained, +45% upside to TP of S$2.20. Maintain BUY on Ezra as confidence in the acquisition of AMC continues to build with the integration progressing on track, a growing subsea order backlog and successful execution of 2 projects recently. We believe Ezra is well positioned to build up its order backlog amidst a buoyant deepwater subsea market characterized with high tendering

activity and contract awards. This will not only provide positive catalysts for the stock, but also improve earnings visibility of the group going forward. Our TP for Ezra is unchanged at S$2.20. This is based on 14x and 12x PE for its core businesses and EOC respectively, on a fully diluted FY12 EPS.

Ezras sum-of-parts valuation

SOTP Valuation Ezra's core businesses EOC Ltd Ezion Holdings Stake 100.0% 47.3% 14.0% Value (S$ m) 1,689.7 338.5 92.0 2,120.2 Ezra's outstanding share capital (m) Potential new shares from CB conversion Fully diluted share capital (m) Implied fully diluted recurring FY11 PE (x) Implied fully diluted recurring FY12 PE (x) Value per share (S$) 1.75 0.35 0.10 2.20 867.9 95.7 963.6 24.3 14.2 Basis 14x recurring FY12F EPS 12x recurring FY12F EPS DBSV's fair value for Ezion Fully diluted TP

Source: DBS Vickers

Page 9

Company Focus Ezra Holdings

Key Assumptions
FY Aug 2009A 2010A 2011F 2012F 2013F

Sensitivity Analysis
2011

Fleet utilisation (%) Day rate (US$/ bhp/ day) Order wins - yard (US$ m) Order wins - subsea (US$ m)

99.0 2.0 0.0 -

94.0 2.0 130.0 -

95.0 2.0 130.0 350.0

95.0 2.0 130.0 500.0

95.0 2.0 150.0 600.0

Utilisation +/- 1ppt Day rate +/- 1%

Net Profit +/- 0.7% Net Profit +/- 0.6%

Segmental Breakdown
FY Aug 2009A 2010A 2011F 2012F 2013F

Revenues (US$ m) Offshore Support Services Marine Services Deepwater Subsea

FY11 growth will be driven by the addition of 4 PSVs since late 2010, along with 1 MFSV expected in 3Q11.

191 93 46

199 134 21

234 112 140

266 147 294

298 101 523 Growth driven by full year contributions from liftboats, consolidation of AMC from 2H FY11 onwards. AMCs margins expected to pick up on higher fleet utilisation rate on better contract coverage in FY12.

Total Gross Profit (US$ m) Offshore Support Services Marine Services Deepwater Subsea

329 73 22 6

354 70 34 1

487 86 27 14

707 101 29 57

922 113 20 106

Total Gross Profit Margins (%) Offshore Support Services Marine Services Deepwater Subsea

101 38.1 24.2 13.3

104 35.1 25.0 3.0

127 36.9 23.7 10.1

187 37.9 19.7 19.4

239 37.9 19.6 20.4 Margins Trend

25.0% 23.0% 21.0%

Total Income Statement (US$ m)

FY Aug

30.7

29.4

26.1

26.4

25.9

19.0% 17.0% 15.0%

2009A

2010A

2011F

2012F

2013F

13.0% 11.0% 2009A 2010A 2011F 2012F 2013F Operating Margin % Net Income Margin %

Revenue Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)

329 (228) 101 (23) 78 0 13 (5) (7) 79 (9) 0 0 70 77 97 22.8 51.9 72.9 (60.0) 30.7 23.7 21.3 15.5 8.4 9.6 10.1 15.2

354 (250) 104 (32) 71 0 13 (12) 7 79 (3) 0 0 76 70 97 7.3 (0.5) (8.4) 8.6 29.4 20.2 21.5 13.5 6.4 6.4 11.6 6.0

487 (357) 130 (52) 78 0 16 (20) (9) 65 (6) 0 0 58 67 111 37.7 15.3 9.2 (23.2) 26.7 16.0 12.0 8.0 3.4 4.5 10.0 3.9

707 (520) 187 (61) 125 0 31 (31) 0 125 (10) 0 0 114 114 179 45.1 61.0 60.3 95.8 26.4 17.7 16.2 12.6 5.4 5.9 10.0 4.1

922 (682) 239 (82) 157 0 26 (35) 0 147 (18) 0 0 129 129 183 30.4 1.9 25.5 12.9 25.9 17.0 14.0 12.7 5.5 6.4 10.0 4.4

FY11 recurring earnings supported by expanded vessel fleet; FY12 growth underpinned by 1) AMCs return to profitability; 2) larger offshore support fleet; 3) full year contributions from the Chim Sao FPSO.

Source: Company, DBS Vickers

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Company Focus Ezra Holdings

Balance Sheet (US$ m)
FY Aug 2009A 2010A 2011F 2012F 2013F

Asset Breakdown 299 107 146 161 5 183 51 952 148 91 162 17 534 0 952 147 (148) 149.4 28.2 15.0 0.4 1.7 1.4 0.3 0.3 57.0 2.4 611 153 150 187 23 206 100 1,430 207 159 448 23 593 0 1,430 169 (467) 200.5 21.7 21.1 0.3 1.4 1.1 0.8 0.8 44.1 1.7 996 223 301 135 23 243 100 2,021 207 163 768 23 860 0 2,021 203 (839) 168.4 22.0 24.4 0.3 1.4 1.0 1.0 1.0 36.2 1.4 1,116 299 326 88 33 283 100 2,244 207 183 866 23 963 1 2,244 232 (985) 135.9 24.1 20.5 0.3 1.3 0.9 1.0 1.0 13.3 1.5 1,227 325 332 71 45 354 100 2,453 207 207 936 23 1,079 1 2,454 293 (1,073) 126.2 26.3 21.0 0.4 1.4 1.0 1.0 1.0 9.7 NA

Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholders Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)

Bank, Cash and Liquid Inventory - Debtors 1.4% 15.0% Assets 8.3% Associates'/J Vs 13.8%

Net Fixed Assets 61.5%

Net gearing to step up in line with capex plans

Cash Flow Statement (US$ m)

FY Aug 2009A 2010A 2011F 2012F 2013F

Capital Expenditure
400

Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (US cts.) Free CFPS (US cts.)

79 6 (6) (13) (96) 5 (26) (177) (14) 0 0 56 (135) 0 114 63 0 177 (7) 8 10.0 (28.9)

79 12 (5) (13) (53) (8) 13 (289) 22 (20) 11 (45) (321) (7) 347 (3) 0 336 (3) 26 9.4 (39.2)

65 18 (10) (16) (30) 0 27 (353) 0 (55) 0 (50) (458) (6) 270 115 0 379 0 (52) 6.6 (37.5)

125 24 (6) (31) (33) 0 79 (143) 0 (45) 0 (25) (213) (11) 99 0 0 87 0 (47) 12.8 (7.4)

147 0 (10) (26) (69) 0 43 (111) 0 0 0 (6) (117) (13) 70 0 0 57 0 (17) 12.9 (7.9)

350 300 250 200 150 100 50 0 2009A 2010A 2011F 2012F 2013F

Capital Expenditure (-)

Cash payment for AMC

Source: Company, DBS Vickers

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Company Focus Ezra Holdings

Quarterly / Interim Income Statement (US$ m)

FY Aug 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011

Margins Trend
35% 30%

Revenue Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)

74 (56) 19 (9) 10 0 3 (2) 0 11 (1) 0 10 10 25

109 (76) 33 (11) 23 0 (1) (2) 7 27 (1) 0 26 18 25

109 (77) 33 (10) 22 0 4 (7) 3 22 (1) 0 22 19 30

76 (50) 26 (4) 22 0 0 (4) (4) 14 (1) 0 13 17 26

99 (70) 28 (12) 16 0 4 (6) (5) 9 (1) 0 8 13 26

25% 20% 15% 10% 5% 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Operating Margin %

Net Income Margin %

22.1 (17.8) (10.9) (43.8) 25.3 13.0 13.9

46.1 50.2 135.1 148.6 30.5 20.9 23.6

0.4 22.6 (1.1) (16.1) 29.8 20.5 19.8

(30.5) (12.1) (2.2) (38.4) 33.7 28.9 17.5

30.2 (2.1) (27.2) (40.1) 28.7 16.2 8.1

Source: Company, DBS Vickers

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Company Focus Ezra Holdings

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

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GENERAL DISCLOSURE/DISCLAIMER This report is published by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) (b) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 6 June 2011, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions).

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Company Focus Ezra Holdings

COMPANY-SPECIFIC / REGULATORY DISCLOSURES DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned as 1. of 2 June 2011. 2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered brokerdealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of 6 June 2011. Compensation for investment banking services: i. ii. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from the Ezra Holdings. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBSVR and DBSVS, which are exempted from the requirement to hold an Australian financial services licence under the Corporation Act 2001 [CA] in respect of financial services provided to the recipients. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [MAS] under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for wholesale investors within the meaning of the CA. This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission. This report is being distributed in Singapore by DBSVR, which holds a Financial Advisers licence and is regulated by the MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G), which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chap. 289 of Singapore. Any distribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to Accredited Investors is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the First Schedule to the FAA. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3 Floor, Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSA regulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBS Bank Ltd, Dubai is regulated by the Dubai Financial Services Authority. Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
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