(NEUTRAL, S$0.485, TP Under Review)
Below expectations; EPS and TP under review. Swiber Holdings posted 2Q11 headline net profit of US$7.4m (-26% QoQ, -46% YoY). Excluding fair value gains on financial derivatives, forex losses and gains on disposal of assets, 2Q11 core net profit of US$2.7m was sharply below ours and consensus expectations. 1H11 core net profit of US$6.2m accounted for 28% of our below-consensus estimates. Our earnings estimates and TP are under review pending an analyst briefing on Mon (15 Aug 2011). There is downward bias to our previous TP of S$0.87.
Headline net profit boosted by fair value gains from convertible bonds. 2Q11 headline net profit of US$7.4m fell 26% QoQ and 46% YoY. 1H11 headline net profit declined 22% YoY to US$17.1m despite strong revenue growth of 73%. 1H11 net profit included: (1) US$10.4m fair value gains from convertible bonds; (2) US$5.6m forex losses; (3) US$3.2m gain from disposal of assets; and (4) US$2.9m gain from termination of currency swaps. Stripping out the four items above, core net profit of US$6.2m was sharply below expectations. 1H11 gross margins of 15.4% came in at the lower end of management guidance of 15-20% and admin cost accounted for 7.3% of revenue. The lower margins were attributed to a deferred project in South Asia which
was completed in 1Q11. Net gearing remains high at 1.17x compared to 0.92x in 2Q10.
Winning more jobs: three contracts worth US$82m in Southeast Asia. YTD, Swiber has won US$377m new contracts vs. our expectation of US$350m. Outstanding orderbook stands at US$722m and this implies 1.1x annualised FY11 revenue. The new contracts will be carried out immediately and targeted for completion in 2Q12. Based on recent news from Upstream, we understand that Swiber is leading the race for the a US$100m pipeline job offshore Burma.
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