• Another quarter of net loss
• Series of bonds maturing starting 2018
• Likely to engage all stakeholders

Net Loss in 2Q17

Ezion Holdings saw a 19.5% YoY fall in revenue to US$67.4m and a net loss of US$2.6m in 2Q17, compared to net profit of US$8.1m in 2Q16. Excluding one-off items such as forex loss and disposal gains, we estimate core net loss of about US$7.4m for the quarter. Total net loss for 1H17 was US$15.3m, vs. our estimate of US$0.1m net profit for FY17.

Suspends Trading of Shares

The group is in discussions with stakeholders such as bank lenders and creditors in relation to its financing and capital structure, and is also taking steps to review its options to strengthen its financial position and preserve value. In anticipation of having to reach out to a larger group of stakeholders, the board has recommended that the trading of the shares be suspended with immediate effect.

Given the dynamic situation the company is in, the board believes that this would ensure that no person is trading in the shares without sufficient information that is required to enable him or her to make an informed decision. A trading suspension would also provide market certainty as Ezion continues to explore financing options and engage in discussions with stakeholders.

Series of Bonds Maturing Starting in 2018

Looking ahead, the group has a S$60m bond maturing in Aug 2018, a S$50m bond in Jan 2019, a S$110m bond in May 2019, and two other bonds in 2020 (combined principal S$175m). The group also has a S$150m, 7% perpetual bond which has a step-up of 300bps in Nov 2018. According to a report by Debtwire, Ezion has appointed RSM Singapore as financial adviser for a debt restructuring plan.

Ceasing Coverage

The operating environment remains tough and it may take some time before a significant recovery can be seen. Ezion has also mentioned that if the situation does not significantly improve or a comprehensive solution to address its cashflow requirements is not found, the group will have to engage all stakeholders for support. Taking the industry outlook into account, as well as company-specific factors mentioned earlier, we cease coverage on the stock due to an internal reallocation of resources.

Source: OCBC Research - 14 Aug 2017