EZRA - US$80 MILLION CONTRACTS SECURE

Ezra plans to bid for over US$1b West African deals Tags: Ezra Holdings Written by Thomson Reuters Tuesday, 19 January 2010 15:30 Share this Digg Del.icio.us StumbleUpon Netscape Yahoo Technorati Googlize this FacebookExport PDFPrintE-mail Singapore energy service company Ezra Holdings (EZRA.SI) is looking to bid for more than US$1 billion ($1.39 billion) worth of contracts from West Africa, its managing director Lionel Lee said on Tuesday. The company earlier announced that it has secured two contracts with a total value of US$80 million, including one from the African oil and gas offshore market

What\'s the usual hit rate for bidding of contracts? Recall that Swiber mentioned it was bidding for \"US$5 billion\" worth of contracts, and it recently managed to secure a total of US$315.3 million worth (refer to recent press releases on SGXNet). So this is a \"hit rate\" of about 6%. Assuming Ezra has a slightly better hit rate due to larger size/reputation etc, let\'s assume about 8%. So if it is bidding for US$1 billion worth of contracts, it will manage to get about US$80 million worth of revenues. Fair enough assumption? For FY 2009 ended Aug 31, 2009, Ezra registered US$329.4 million worth of revenues. Thus, this round of bidding and possible contract wins makes up about 24.2% of its FY 2009 revenues. While significant, in order to show sustainable top-line growth, it has to expand its sub-sea deepwater services significantly and also its fabrication and production division. It also has to maintain gross margins of 40% for deepwater in order to ensure profits remain high. It will be interesting to observe if this will be possible. Their Balance Sheet is currently very highly geared, both on Ezra\'s part and also EOCL (listed in Oslo). Cash Flows from Operations only hit US$1 million in 1Q 2010, so investors should take note. Not vested.

What I have posted is just the news and I have not mentioned anything about buying this stock. But the market now is behaving \'buy on rumours and sell on news. I post and you decide.