Background: Swiber is involved in the offshore sector, where it provides engineering, procurement, installation and construction (EPIC) services, as well as operates more than 50 vessels. It also holds a 63% stake in SGX-listed subsea solutions provider Kreuz Holdings, which mainly provides diving services.
Recent development: Swiber recently announced interim earnings that put it in a position to achieve solid profitability for the full year. It also announced new contracts, which have raised its orderbook to record levels.
Key ratios…
Price-to-earnings: 6.3x
Price-to-NTA: 0.6x
Dividend per share / yield: na
Net cash/(debt) per share: (S$0.68)
Net debt as % of market cap: 136%
Share price S$0.505
Issued shares (m) 508.35
Market cap (S$m) 256.7
Free float (%) 63.3%
Recent fundraising activities July 2010: S$500m MTN programme; US$100m in convertible notes
Financial YE 31 Dec
Major shareholders Pang Yoke Min – 10.8%, Goh Kim Teck – 6.0%, Yeoh Chee Neng – 6.0%
YTD change -50.0%
52-wk price range S$0.455-1.16
Our view
Decent 1H11. Swiber posted 1H11 net earnings of US$24.5m, up 9.4%, on the back of a healthy 73.1% rise in revenue. Margins have deteriorated due to a deferred project that was completed in 1Q11. The numbers also included fair value gains from its convertible bonds. Gross profit earnings were decent, up 23%.
Contract wins reflect buoyant sector. Swiber recently announced several contract wins. Last Friday, it announced three contracts worth US$82m for pipeline installation services in the region for three Southeast Asian oil majors. Yesterday, it announced a platform installation contract for US$30m. Orderbook for the next two years now stands at US$752m.
Heavily geared. Swiber currently has a net gearing ratio 1.1x. Among its financial commitments are US$147m in bank loans, US$248m in bonds and US$103m in convertible notes. While its cash in hand stands at US$107m, this is expected to be deployed to expand the business. Gross gearing stands at 1.3x. We estimate that the company also has the facilities to raise debt by a further US$300m.
Cheap valuations. Swiber’s share price has been on a downtrend over the past six months, culminating in a steep 25% drop in the last market sell-down. With flat earnings in 2011, 2012 is expected to show significant growth, driven by its orderbook. Valuations are compelling at 6.3x FY11 PER and 4.7x for FY12. P/B is 0.6x, below its peer average of 2.2x, mainly due to the relatively large fleet it owns.
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