DBSVickers Report - 14 Jan 2008

Ezra Holding (EZRA SP) In line with expectations

Buy S$3.12;
Price Target : S$ 4.00
1Q08 net profit, ex EI, rose 270% yoy to S$16.1m, making up 27% of FY08F.

Revenue benefited from

(1) the full 3-mth contributions of eight vessels that were delivered in 4Q07 – seven AHTS vessels and a crewboat;
(2) 1 launch barge that was delivered after Nov 2006; and
(3) one month operations from one accommodation barge Lewek Chancellor and one pipelaying barge – Lewek Champion.

Gross Margin improvement reflected the rising charter rates. Net EI gain of S$172.3m includes S$197.9m from partial divestment of 39.1% stake in Oslo Bors-listed EOC. This was mainly offset by S$12.4m forex loss arising from translation of cash items denominated in US$ and NOK.

China Auto Electronics Share price has overshoot on the downside

Story: Our check with management over the weekend shows that China Auto’s sales in 4Q 2007 may be weaker than expected, due to slower sales growth from its customers.

Point: We have cut our recurring earnings estimates by 22.7% to RMB90.6m in FY07 and 24.7% to RMB195.6m in FY08, so as to account for the lower than expected utilization rates at China Auto’s factories. While our previous forecasts now appear to be too bullish, on hindsight, the reduced numbers still reflect a strong 196% y-o-y recurring net profit growth in FY07 and 116% growth in FY08. This is underpinned by the bullish outlook for the Chinese automobile component market, and our expectation that China Auto is able to leverage on its status as the largest Chinese company providing wire harness in the PRC.

Relevance: Our fair value has also been adjusted to S$0.875; using a similar 15x PE and the downward revised FY08 EPS. Still, the recent share price weakness does not reflect China Auto’s longer term potential, and we maintain our BUY rating on the counter.