Ezra and ASL as favourites. Ezra Holdings (Ezra) and ASL Marine Holdings (ASL) remain as our favourites for the sector. Ezra has relatively defensive earnings, and coupled with the low base earnings accretion effect from its fledgling Subsea business, valuations will inevitably be driven upwards if executed well. Its fleet management business will lower reliance on spot charters and possibly boost earnings. ASL Marine's diversified business model (shipbuilding, repair and chartering) is expected to provide earnings support and its Batam yard expansion should translate to higher earnings with more repair work required from an enlarged global fleet. We maintain our BUY rating for Ezra [Fair value: S$2.00], and BUY rating for ASL Marine [Fair Value: S$1.18].

Swiber - lower debt, now waiting for contract wins. Swiber has a declining order book with recent contract wins comprising mainly of smaller ones compared to its previous major contracts, partly illustrating the slow down in the momentum of awarding projects by oil companies. However there seems to be increased hopes of bigger contract wins towards the end 09, though we would prefer to see this buzz translated to concrete wins. The group's debt level has also historically been relatively high, but net gearing is likely to improve further with proceeds from the sale and leaseback of vessels. Swiber's recent capital raising activities (incl. placement exercise) are important since it has two MTNs maturing in Aug 2010 and another two in Mar 2011 with quantum of US$71.2m and US$72m respectively. Swiber recently proposed a convertible bond issue to raise up to US$100m and the additional cash flow should ease its balance sheet. We maintain our HOLD rating for Swiber [Fair Value: S$0.94].