Asia Pacific Equity Research 24 October 2014 Neutral Ezra Holdings Ltd Previous: Not Rated A quarter of steady earnings but headwinds on subsea outlook, gearing remain; reiterate Neutral rating Price: S$0.83 EZRA.SI, EZRA SP Following a period of restriction, we are moving from a Not Rated designation to a Neutral rating and an August 2015 price target of S$0.75 (Neutral rating and August 2014 S$0.90 price target prior to restriction). 4Q14 and FY14 review; some improvement, but still early days: Earlier this morning Ezra reported its 4Q14 and FY14 earnings, coming in at US$11 million and US$45.3 million, respectively, which was up 10% for the quarter but down 16% for the year. On a recurring basis, FY14 earnings came in at US$38 million. Overall, while this was a decent quarter with double-digit recurring earnings profit at US$18 million (its highest level since 3Q12), we continue to view the consensus estimate as too high (US$68 million) and cut our FY15E earnings by 32% to US$49 million. We extend our PT of S$0.75 to Aug-15 and reiterate our Neutral recommendation. Key takeaways from FY14 analyst briefing: (1) Guidance of ~US$150 million in capex annually as the bulk of capex is over as Constellation is in the final stages of completion. (2) OSV G.P margins guidance into next year at high-20% levels as FY14 was impacted by unplanned dockings while FY13’s high “headline” OSV margins is due to sale and leaseback gains of US$29 million while subsea currently at 10% GP margins with 4Q14 subsea seeing higher margins at 14-15%. (3) The company aims to add over the next few years (a) 8-10 OSVs and, (b) 4 x accom vessels. (4) The company is targeting improved operating cash flows and hopes to bring down its gearing to 0.7-0.8x from 1.1x over the next two years. (5) The company is not seeing any weakness in day rates but is seeing some impact on shallow-water AHTs. (6) Targeting US$1 billion of orders in FY15E. (7) Constellation vessel is fully utilized until early 2016 (the next job starting by April 2016) and, given that it is still an uncompleted vessel, no depreciation is on the P&L yet. (8) High 80%+ OSV utilization seen with >90% for AHTS while smaller PSVs and AHTs were lower at 60-70%. (9) Subsea focus will be more on Africa and the US Gulf market. Price Target: S$0.75 Singapore Oil Services & Equipment Ajay Mirchandani AC (65) 6882-2419 [email protected] Bloomberg JPMA MIRCHANDANI <GO> J.P. Morgan Securities Singapore Private Limited Price Performance 1.3 S$ 1.1 0.9 0.7 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 EZRA.SI share price (S$) FTSTI (rebased) Abs Rel YTD -37.1% -39.0% 1m -15.6% -13.7% 3m -29.1% -26.0% 12m -31.4% -32.4% Ezra Holdings trades at 12.0x FY15E P/E and 0.5x FY15E P/BV. Ezra Holdings Ltd (Reuters: EZRA.SI, Bloomberg: EZRA SP) $ in mn, year-end Aug FY12A FY13A FY14E Revenue ($ mn) 984 1,262 1,488 Gross Profit ($ mn) 186 169 227 Gross Margin 18.9% 13.4% 15.2% Net profit (reported) ($ mn) 65 54 45 Net Profit (recurring) ($ mn) 24 (39) 38 EPS (Recurring) ($) 0.02 (0.04) 0.04 P/E (Recurring) 26.8 NM 16.9 P/BV (x) 0.6 0.6 0.6 ROE 2.5% (3.7%) 3.4% Div Yield 0.0% 0.0% 0.0% Net debt to equity 109.9% 97.2% 115.6% Source: Company data, Bloomberg, J.P. Morgan estimates. FY15E 1,585 255 16.1% 49 49 0.05 13.1 0.5 4.2% 0.0% 113.1% FY16E 1,817 294 16.2% 62 62 0.06 10.2 0.5 5.2% 0.0% 110.7% Company Data Shares O/S (mn) Market Cap ($ mn) Market Cap ($ mn) Price (S$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (S$ mn) FTSTI Exchange Rate Price Target End Date Price Target (S$) 979 636 636 0.83 24 Oct 14 3.70 3.57 3222.55 1.28 31-Aug-15 0.75 See page 7 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com Asia Pacific Equity Research 24 October 2014 Ajay Mirchandani (65) 6882-2419 [email protected] Key catalysts for the stock price: • Order wins in the coming months Upside risks to our view: • Higher-than-expected order wins • Higher margins from jobs Downside risks to our view: • Delay in orders could see steep fall in earnings • Execution risks: cost over-runs in new markets Key financial metrics Revenues (US$ mn) Revenue growth (%) EBITDA (US$ mn) EBITDA margin (%) Tax rate (%) Net profit (US$ mn) EPS (S$ ) EPS growth (%) DPS (S$) BVPS (US$ ) Operating cash flow (US$ mn) Free cash flow (US$ mn) Interest cover (X) Net margin (%) Sales/assets (X) Debt/equity (%) Net debt/equity (%) ROE (%) Key model assumptions Borrowing Cost Gross Profit Margin FY13A 1,262 28% 107 8% 31% -39 FY14E 1,488 -3% 83 10% 28% 38 FY15E 1,585 44% 166 8% 17% 49 FY16E 1,817 44% 177 10% 17% 62 -0.04 -262% 0.04 -225% 0.05 63% 0.06 28% 0.00 1.11 -15 -264 0 -3% 0.46 112.6% 97% -4% FY13A 3.7% 13% 0.00 1.15 99 -228 2 3% 0.51 129.5% 116% 3% FY14A 3.7% 15% 0.00 1.20 113 -29 2 5% 0.47 137.3% 113% 4% FY15E 2.8% 16% 0.00 1.27 112 -51 3 3% 0.52 129.2% 111% 5% FY16E 2.8% 16% Valuation and price target basis Our Aug-15 price target of S$0.75 is based on a P/E multiple of 12.0x, compared to subsea peers such as Technip, Saipem which trade at an average P/E of 10.2x. We have ascribed a 20% premium to Ezra to reflect its early stage positioning in the subsea sector and longer-term growth potential alongside with it being listed in Singapore. FY13A revenue breakdown 17% 70% Offshore support services Marine engineering Subsea Services Source: Bloomberg, Company and J.P. Morgan estimates. Sensitivity analysis Sensitivity to 1% chg in borrowing cost 1% chg gross margin assumption EBITDA FY15E 0% 12% 13% Source: Company data. FY16E 0% 10% EPS FY15E -7% 22% JPMe vs. consensus, change in estimates Net Income JPMe old JPMe new % chg Consensus FY16E -6% 29% Source: J.P. Morgan estimates. FY15E 72 49 -32% 69 FY16E 62 nm 92 Source: Bloomberg, J.P. Morgan. Table 1: Valuations for companies under coverage Company Singapore Keppel Corp Sembcorp Marine Ezion Dyna-Mac COSCO Corp Malaysia Bumi Armada SapuraKencana MMHE Dialog Perisai Petroleum UMW Oil & Gas Mkt Cap (US$ mn) Price (LC) FY14E P/E FY15E FY14E P/B FY15E Dividend Yield FY14E FY15E FY14E 13,814 6,009 1,936 292 1,027 9.70 3.67 1.57 0.38 0.59 12.3x 12.6x 8.6x 13.0x 19.3x 12.0x 11.8x 7.6x 7.8x 19.3x 1.7x 2.6x 1.8x 2.0x 1.0x 2,744 6,595 1,238 2,362 416 2,168 1.63 3.54 2.26 1.67 1.06 3.44 14.8x 13.6x 18.1x 35.3x 38.3x 23.4x 12.1x 11.8x 16.9x 31.8x 10.5x 18.2x 1.5x 1.8x 1.5x 5.1x 1.2x 2.3x ROE FY15E 1.6x 2.4x 1.4x 1.9x 1.0x 5.2% 4.7% 17.3% 5.1% 3.4% 5.2% 5.2% 18.9% 7.7% 3.4% 14.2% 21.6% 22.7% 16.0% 4.3% 13.9% 21.5% 19.2% 22.9% 4.2% 1.3x 1.6x 1.4x 4.7x 1.1x 2.1x 1.2% 0.0% 1.2% 0.9% n/a 0.3% 1.7% 0.0% 1.2% 1.3% 0.0% 0.6% 10.6% 14.2% 8.2% 15.8% 3.9% 10.4% 11.1% 14.3% 8.4% 16.5% 11.4% 11.7% Source: Bloomberg, J.P. Morgan estimates. Prices as of 23 Oct 2014. SAKP’s year end is January, so FY14E and FY15E represent Jan 15E and Jan 16E, respectively. Dialog’s year end is June. 2 Asia Pacific Equity Research 24 October 2014 Ajay Mirchandani (65) 6882-2419 [email protected] Table 2: Ezra's quarterly performance US$ in millions, year-end August 4Q14 446.0 (382.7) 63.3 14% (42.2) 9% 3.4 24.4 5% 1.0 (11.2) 0.0 2.7 0.0 17.0 (4.1) 24% 12.9 (1.9) 11.0 (7.2) 18.2 Revenue COGS Gross profit G. P. margin (%) SG&A SG&A as % of revenues Other operating income/(exp) EBIT EBIT margin (%) Interest income Interest expense Other non-operating gains/(exp) Share of associates/JV profit Exceptionals Profit before tax Tax Effective tax rate (%) Profit after tax Minority interests Net profit Exceptionals Net profit (recurring) 4Q13 419.2 (344.3) 74.8 18% (50.7) 12% 1.0 25.1 6% 1.2 (10.3) 0.0 5.7 0.0 21.7 (8.2) 38% 13.5 (3.5) 10.0 (4.0) 14.0 y/y 6% 11% -15% -17% 239% -3% -19% 8% nm -52% nm -22% -51% -5% nm 10% nm 30% 3Q14 402.1 (336.7) 65.4 16% (45.7) 11% 0.4 20.1 5% 1.0 (10.4) 0.0 23.7 0.0 16.6 (6.4) 39% 10.2 (1.9) 8.3 (0.8) 9.1 q/q 11% 14% -3% -7% 779% 21% -4% 8% nm -88% nm 2% -37% 26% nm 33% nm 100% FY14E 1417.4 (1145.7) 271.7 19% (177.2) 13% 0.0 94.5 7% 3.1 (52.2) 0.0 12.6 0.0 57.9 (9.8) 17% 48.1 0.1 48.2 0.0 48.2 FY14A 1488.4 (1261.4) 226.9 15% (157.3) 11% 7.2 76.8 5% 3.6 (42.7) 0.0 36.9 0.0 74.6 (20.7) 28% 53.9 (8.8) 45.2 7.6 37.6 17.9% 17.1% 17.9% FY13A 1262.1 (1092.8) 169.2 13% (165.7) 13% 105.2 108.7 9% 5.0 (43.5) 0.0 22.1 0.0 92.3 (28.2) 31% 64.1 (10.4) 53.6 92.2 (38.5) y/y 18% 15% 34% -5% -93% -29% -27% -2% nm 67% nm -19% -27% -16% -16% -16% nm -198% Source: Company, J.P. Morgan calculations. *Recurring earnings do not exclude dividends paid to perpetual shareholders Figure 1: Ezra’s quarterly gross margins 40.0% 35.0% 30.0% 29.2% 33.7% 31.6% 30.5% 29.8% 28.7% 25.3% 25.0% 20.0% 16.9% 15.0% 19.2% 14.2% 22.3% 16.2% 16.7% 14.9% 15.9% 16.3% 14.2% 10.0% 5.0% 0.7% 0.0% 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Source: Company data Figure 2: Ezra’s net debt / equity (%) 140% 120% 100% 80% 90% 89% 2Q11 3Q11 96% 104% 109% 102% 110% 91% 89% 1Q13 2Q13 101% 102% 108% 3Q13 4Q13 1Q14 112% 2Q14 119% 121% 3Q14 4Q14 69% 60% 40% 20% 0% 1Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Source: Company data 3 Asia Pacific Equity Research 24 October 2014 Ajay Mirchandani (65) 6882-2419 [email protected] Table 3: EMAS’ quarterly performance US$ in millions, year-end August Revenue Cost of Sales Gross Profit Other Operating Income/(expenses) Admin. Expenses Profit from Operations (EBIT) Financial Expenses Financial Income Share of Profit/(loss) of Associates Share of Profit/(loss) of JV PBT Income tax PAT Minority Interests PATMI 4Q14 14 (5) 9 (2) (3) 4 (1) 1 4 0 8 0 8 (0) 8 4Q13 12 (6) 7 3 (3) 7 (2) 1 0 0 6 (0) 6 (0) 6 % change YoY 10% -18% 32% -156% 20% -49% -62% 22% 58714% 100% 30% -328% 36% -55% 36% 3Q14 10.8 (8) 3 (0) (2) 0 (1) 1 4 0 4 (0) 4 (0) 4 % change QoQ 25% -44% 237% 917% 37% 6857% -20% 27% -8% 0% 87% -169% 110% 400% 110% FY14A 47 (23) 24 34 (10) 48 2 (6) 15 0 60 (0) 60 0 60 FY 13A 43 (21) 23 4 (10) 17 2 (8) 1 0 12 (1) 11 0 11 (1) 5 14 12 2 (5) (1) (5) (3) 10 12 10 2 7 6 2 -63% -53% 10% 14% -16% -172% -112% -375% (1) 1 11 10 1 5 6 (1) 7% 399% 25% 19% 97% -213% -112% 423% (7) 55 47 40 7 43 41 2 (11) 27 43 39 4 17 12 5 D&A EBITDA Revenue by Segment Construction Production EBIT Construction Production YoY 9% 12% 6% 679% -2% 188% 16% -31% 1080% -23% 410% -70% 440% nm 441% nm -34% 102% 9% 1% 98% 159% 244% -65% Source: Company data. Table 4: Triyards’ quarterly performance US$ in millions, year-end August Revenue Cost of Sales Gross Profit Other Income Admin. Expenses EBIT Financial income Financial expenses PBT income tax PAT Depreciation EBITDA 4Q14 48.8 (35.6) 13.2 0.2 (5.8) 7.5 0.0 4Q13 76.7 (62.3) 14.4 0.3 (2.4) 12.3 0.0 YoY -36% -43% -9% -43% 138% -39% -67% 3Q14 55.3 (42.8) 12.5 0.1 (4.3) 8.3 0.0 QoQ -12% -17% 6% 86% 37% -9% 0% (1.2) 6.3 (1.0) 5.3 (2.0) 9.6 (0.8) 11.5 (1.2) 10.3 (1.5) 13.8 54% -45% -13% -49% 36% -30% (1.2) 7.1 (0.9) 6.3 (2.0) 10.3 5% -12% 18% -16% 2% -7% Source: Company data. EMAS’ 4Q14 results EMAS posted a 10% increase in revenue y/y mainly due to higher revenue contribution from Lewek Chancellor and Lewek Conqueror due to the higher rate secured in new charters. The gross profit margin declined from 55% in 4Q13 to 34% in 4Q14. Triyards’ 4Q14 results Triyards posted 4Q14 net income of US$5.3 million vs US$10.3 million in 3Q14. Revenue declined by 36% y/y to US$5.3 million due to lower revenue recognized from two SEUs of BH450 series. However, the gross profit margin came in higher at 27% this quarter vs 19% in 4Q13 4 Ajay Mirchandani (65) 6882-2419 [email protected] Asia Pacific Equity Research 24 October 2014 Investment Thesis, Valuation and Risks Ezra Holdings Ltd (Neutral; Price Target: S$0.75) Investment Thesis Ezra remains one of our least preferred offshore stocks in Singapore given (a) continued earnings disappointments over the last 2-3 years, (b) poor track record of its subsea earnings, (c) high gearing, and (d) high capex needs with negative free cash flow profile. Valuation Our Aug-15 price target of S$0.75 is based on a P/E multiple of 12x compared to the subsea peers like Technip, Saipem which trade at an average P/E of 10.2x. We have ascribed a 20% premium to Ezra to reflect its early stage positioning in the subsea sector and longer-term growth potential alongside with it being listed in Singapore. Risks to Rating and Price Target Key downside risks to our price target include 1) worse-than-expected margins from subsea division; and 2) a deceleration of E&P activities. Upside risks include: (1) Significant improvement in subsea profitability. 2) Better-than-expected OPM for its OSV business. (3) Significant improvement in FCF reducing risk of equity raising in the medium term. 5 Asia Pacific Equity Research 24 October 2014 Ajay Mirchandani (65) 6882-2419 [email protected] Ezra Holdings Ltd: Summary of Financials Income Statement $ in millions, year end Aug Revenues % change Y/Y Gross Margin EBITDA % change Y/Y EBITDA Margin EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Minority Interests Net income (reported) % change Y/Y Shares outstanding Fully Diluted EPS Balance sheet $ in millions, year end Aug Cash and cash equivalents Accounts receivable Inventories Others Current assets FY12 FY13 984 1,262 76.0% 28.2% 18.9% 13.4% 162 160 78.4% (1.4%) 16.4% 12.6% 116 109 79.8% (6.5%) 11.8% 8.6% (35) (39) 86 92 67.0% 6.7% (22) (28) 25.0% 30.6% 0 (10) 65 54 50.7% (17.4%) 978 979 0.07 0.05 FY12 133 478 89 353 1,054 FY13 176 508 75 331 1,090 LT investments 34 38 Net fixed assets 1,167 1,346 Total Assets 2,734 2,927 Short-term loans 606 501 Payables 342 349 Total current liabilities 1,026 961 Long-term debt 638 783 Other liabilities 58 43 Total Liabilities 1,723 1,787 Shareholders' equity 1,011 1,091 Total Liabilities and equity 2,734 2,927 BVPS 1.03 1.11 Net Debt 1,111 1,108 Source: Company reports and J.P. Morgan estimates. 6 FY14E 1,488 17.9% 15.2% 141 (11.8%) 9.5% 77 (29.4%) 5.2% (39) 75 (19.1%) (21) 27.7% (9) 45 (15.8%) 979 0.05 FY15E 1,585 6.5% 16.1% 169 20.4% 10.7% 97 25.9% 6.1% (41) 69 (7.8%) (12) 17.0% (9) 49 7.4% 979 0.05 FY16E 1,817 14.6% 16.2% 194 14.8% 10.7% 116 20.0% 6.4% (41) 88 28.3% (15) 17.0% (11) 62 28.3% 979 0.06 FY14E FY15E FY16E 179 194 243 583 621 712 97 103 118 352 352 352 1,210 1,270 1,424 48 1,594 3,363 510 425 1,083 1,040 54 2,177 1,130 3,363 1.15 1,371 48 1,670 3,498 510 452 1,111 1,090 54 2,255 1,178 3,498 1.20 1,406 48 1,755 3,738 510 519 1,177 1,190 54 2,421 1,241 3,737 1.27 1,457 Cash flow statement $ in millions, year end Aug Profit before tax Depreciation & amortization Change in working capital Other non-cash items Cash flow from operations Capex Net Acquisitions Cash flow from investments Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash DPS Ratio Analysis $ in millions, year end Aug EBITDA margin EBIT margin Net margin SG&A/Sales a Sales growth EBIT growth Net profit growth Recurring EPS growth Interest coverage (x) Net debt to equity FY12 86 45 (137) (17) (61) (289) (266) (247) FY13 92 58 (31) (63) (15) (249) (96) (74) 95 251 (2) 0 344 17 116 133 0.00 0 146 (1) 0 145 40 133 173 0.00 FY12 16.4% 11.8% 2.4% 13.8% FY13 12.6% 8.6% (3.1%) 13.1% FY14E FY15E 75 69 71 73 7 (17) 2 41 99 113 (327) (143) (331) (143) (191) 5 0 238 (1) (5) 232 1 173 174 0.00 FY16E 88 78 (40) 41 112 (164) (164) (18) 0 50 0 0 50 21 174 194 0.00 0 100 0 0 100 49 194 243 0.00 FY14E FY15E 9.5% 10.7% 5.2% 6.1% 2.5% 3.1% 10.6% 10.0% FY16E 10.7% 6.4% 3.4% 9.8% 76.0% 28.2% 17.9% 6.5% 14.6% 79.8% (6.5%) (29.4%) 25.9% 20.0% 50.7% (17.4%) (15.8%) 7.4% 28.3% 10.6% (262.4%) (197.7%) 29.1% 28.3% 4.7 4.1 3.6 4.1 4.8 109.9% 97.2% 115.6% 113.1% 110.7% a Sales/assets Assets/equity ROE ROCE a 40.3% 262.7% 2.5% 4.3% 44.6% 269.2% (3.7%) 3.3% 47.3% 46.2% 50.2% 283.2% 297.3% 299.1% 3.4% 4.2% 5.2% 2.2% 2.9% 3.4% Asia Pacific Equity Research 24 October 2014 Ajay Mirchandani (65) 6882-2419 [email protected] Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention. Important Disclosures Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Ezra Holdings Ltd. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan– covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected]. Ezra Holdings Ltd (EZRA.SI, EZRA SP) Price Chart 6 OW S$4 5 OW S$6.3 OW S$4.6 N S$1 N S$0.9 N S$0.75OW S$3.05 N S$1.15 OW OW OW S$8.6 S$9.2 OW S$2.85 UW S$0.6OW S$2.4OW S$2.65 4 S$4.25 N S$1.35 NR N S$1.15 Price(S$) 3 2 1 0 Oct 06 Apr 08 Oct 09 Apr 11 Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Oct 09, 2006. Oct 12 Apr 14 Date Rating Share Price Price Target (S$) (S$) 09-Oct-06 OW 1.68 4.25 06-Feb-07 OW 2.65 6.30 27-Jun-07 OW 2.75 8.60 16-Oct-07 OW 3.45 9.20 11-Jan-08 OW 3.12 4.60 08-Apr-08 OW 2.41 4.00 19-Sep-08 OW 1.21 2.85 14-Jan-09 UW 0.76 0.60 08-Apr-09 N 0.80 0.75 08-Jul-09 N 1.15 1.00 16-Oct-09 OW 2.02 2.40 21-Jan-10 OW 2.35 3.05 16-Jul-10 OW 1.87 2.65 11-Jan-13 N 1.30 1.35 12-Apr-13 N 1.08 1.15 26-Jun-13 N 0.92 0.90 13-Jan-14 N 1.27 1.15 17-Jan-14 NR 1.12 -- The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com. Coverage Universe: Mirchandani, Ajay: Aboitiz Power (AP.PS), Bumi Armada Berhad (BUAB.KL), COSCO Corporation (COSC.SI), DMCI Holdings (DMC.PS), Dialog Group Bhd (DIAL.KL), Dyna-Mac Holdings Ltd (DMHL.SI), Electricity Generating Company 7 Ajay Mirchandani (65) 6882-2419 [email protected] Asia Pacific Equity Research 24 October 2014 (EGCO.BK), Energy Development (EDC) Corporation (EDC.PS), Ezion Holdings Ltd (EZHL.SI), Ezra Holdings Ltd (EZRA.SI), Glencore International PLC (0805.HK), Glow Energy (GLOW.BK), Icon Offshore Berhad (ICON.KL), Keppel Corporation (KPLM.SI), Linc Energy Ltd (LINC.SI), Malaysia Marine and Heavy Engineering Holdings Bhd (MHEB.KL), Manila Electric Company (MER.PS), Manila Water Company Inc (MWC.PS), Metro Pacific Investments Corp. (MPI.PS), PACC Offshore Services Holdings Ltd (PACC.SI), Pacific Radiance Ltd. (PACI.SI), Perisai Petroleum Teknologi Bhd (PPTB.KL), Ratchaburi Electricity Generating Holding (RATC.BK), SapuraKencana Petroleum Bhd (SKPE.KL), Sembcorp Marine (SCMN.SI), Semirara Mining Corp (SCC.PS), Tenaga (TENA.KL), UMW Oil & Gas Corp Bhd (UMOG.KL), Vard Holdings Ltd (VARD.SI), YTL Power (YTLP.KL) J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2014 J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 46% 57% 46% 76% Neutral (hold) 42% 49% 48% 67% Underweight (sell) 12% 34% 7% 51% *Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above. 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