With Ezra Holdings' (Ezra) two Multi Functional Support Vessel (MFSVs) at Karmsund yard cancelled without penalties (OIR originally expected one cancellation), we are refining our revenue estimates. FY09 will have accretion from one Anchor Handling Tug Supply (AHTS) vessel while FY10 will have accretions from two MFSVs. We maintain our initial stance that the MFSV at Keppel Singmarine will also be cancelled. In total, Ezra will add 72,000BHP (prev OIR est. 99,000BHP) over the next two years. Netting the effect of better charter rates from its MFSVs and the loss of accretion of one more MFSVs from our previous estimates, our FY10F recurring revenue estimates fall by ~7%.

Hard to replace a "Rolls-Royce". Ezra would be one of the first companiesto obtain its MFSVs in 2010, creating a new class of support vessel for the industry. Ezra's on-site managers have indicated that the building progress is on-schedule. We understand that Ezra could sign contracts now but are wisely choosing not to in view of the long lead time to vessel delivery in 2010. Even with a 1-2 month delivery delay, Ezra will have to incur high costs to replace such technically advanced vessels on spot rates. Swiber was an apt example when it incurred heightened costs due to vessel delivery delays in 4Q08.

Charter rates holding firm. From its last contract that Ezra renegotiated, we believe that charter rates are still holding firm for deep water capable vessels (Ezra's fleet is 77% deep water capable). With only 10-15% of charters up for renewal annually, we are encouraged by charter rates still holding relatively steady. We do note that offshore charter rates can lag in changes (up or down) as vessels have long term contracts in place. With oil prices finding a floor, we think that FY10 rates can still be renewed at current levels or maybe better.

EOC updates. EOC's FPSO in Thailand has still yet to commence gas extraction and we are expecting it to become accretive in May 09 (5 months delay). Once online, the US$228k/day rate it charges would help boost EOC's earnings.

Steady business. The lower income from its core chartering business is buffered by better visibility of EOC's business. Our fair value is tweaked to S$1.01 (prev: S$1.09) based on SOTP valuation. Maintain BUY.