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Swiber Holdings (SWIB SP) BUY
Price: S$1.06/Target: S$1.54 Analyst: Nancy Wei/Stella Tan Tel: (65) 6590-6628/29 Mkt Cap: S$538m Daily Vol: S$8.8m 1-Yr Hi/Lo: S$1.250/0.815
•* Infield Systems’ latest offshore fixed platform data suggest that 2011 will see a ramp-up in installation activities. 2010 could register a total of 111 platform installation projects in Australasia, a sharp increase of 25% over 2010’s total of 89 projects. Of 2011’s potential 111 platform installations, 70% are platforms under construction, firm plans and probable projects, and 80% will be in markets in which Swiber has established a competitive presence.
* Thailand (26 platform installations), India (20), Indonesia (18), Vietnam (6) and Brunei (2) will account for 23%, 18%, 16%, 5% and 2% of 2011’s total installations respectively. In particular, we expect Swiber to continue to see good contract wins in Thailand (via its joint venture with resident offshore fabricator CUEL), India, Indonesia, Vietnam and Brunei. As for Malaysia (16 installations), Swiber plays a sub-contractor role via its joint venture (JV) with offshore support vessel services company Alam Maritim.
Stock Impact
• * 2010 is seeing the beginning of a pick-up in offshore fixed platform installations after a lull in 2009. As offshore exploration & production (E&P) capital spending typically lags economic recovery by two years, we expect more decisive spending ramp-up in 2011 given that oil price above US$70/bbl is here to stay. Swiber will be a major beneficiary of this spending given its presence in major oil-producing regions including South-east Asia (Brunei, Indonesia, Thailand, Malaysia, Myanmar and
Vietnam), India and the Middle East.
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* Upstream has reported two potential mega contracts – a) Swiber- Rawabi, one of Swiber’s JVs in the Middle East, is among eight bidders vying for an EPIC contract (estimated value: US$3b) from Saudi Aramco relating to offshore facilities for the Wasit gas field, and b) CUEL, Swiber’s JV partner in Thailand, is one of the four bidders for a three-year contract from PTTEP for the fabrication and installation of up to 22 wellhead platforms for Gulf of Thailand gas fields.
Earnings Revision/Risk
* No earnings revision. Cost vagaries remain the key risk.
Valuation/Recommendation
* Maintain BUY and target price of S$1.54. Our target price is based on a PE of 13x 2011F earnings, 3-SD above sector long-term PE mean of 9x. This is still significantly below Swiber’s PE of 25-27x during the boom times of the last oil cycle (2003-09).
Share Price Catalyst
* Operating profit ramp-up on higher turnover and margins.
Swiber Holdings (SWIB SP; S$1.06)
Spike in share price. This morning, Swiber saw its share price rally by almost 4% to S$1.06. We think the revival of trading interest in Swiber could related to the company currently bidding for an array projects worth a total of US$5bn combined.
Outlook looks rosy. The company was also invited to, and qualified for, the Saudi Aramco fabrication bid (US$3bn+), and it expects to announce several contract wins in 4Q10. Assuming the historical hit rate of 15-20% and management’s guidance that around 70% of the order amount will be booked by Swiber, new order flow over the next 12 months could be higher than the US$400m pa it achieved in 2007-08.
Maintain Outperform with a TP of S$1.42.
ozone2002 ( Date: 14-Sep-2010 09:10) Posted:
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swiber forming a ascending triangle with resistance @ 1.03
look out for the breakout above 1.03...
Oil and Gas: Good buys in a stable environment
Summary: Crude oil prices have been hovering at the Goldilocks range of US$70-90/bbl for the most of this year, consistent with our expectations. Going forward, we expect it to trade within this range, and such price stability should be favourable to the global economy and the oil industry. The oil and gas value chain spans exploration, development, production, transportation, refining and distribution. Most of the companies under our coverage are mainly involved in the first four segments, and we are more optimistic about companies with exposure to the development and production segments, given the relatively brighter outlook. As such, we maintain our BUY ratings for Keppel Corp[FV: S$11.22], Sembcorp Marine [FV: S$4.75], Swiber Holdings[FV: S$1.38] and Ezra Holdings [FV: S$2.52]. (Low Pei Han)
swiber is indeed undervalued...
i like good companies on sale..
Swiber Holdings
On the road
We hosted a non-deal road show in Hong Kong for Swiber's management, during
which management addressed common investor concerns about the company.
We expect earnings to improve, reflecting order book growth, starting 2H10. We
Investors concerns regarding execution may be excessive, in our view Investors in general were concerned that while Swiber’s shares appear undervalued, the
company may not deliver on earnings despite the increase in order book since 3Q09. We
believe Swiber can, since revenue typically lags new orders by a year. Swiber's historical
execution issues came from delays in new vessel deliveries from shipyards struggling with
excess demand – this is no longer the case after the 2008 financial crisis. In any case Swiber
has completed fleet expansion for the medium term, according to management. 2H10 guidance suggests earnings will start to reflect order growth Management expects US$280m in revenue to be recognised in 2H10 from the US$915m
order book, which implies 43% yoy top-line growth. Earnings growth is likely to be higher due
to operating leverage – over 150% yoy, given the company’s GP and NP margin guidance of
15-20% and 10%+, respectively. Swiber currently bidding for numerous projects worth US$5bn combined Swiber has submitted bids in India, Vietnam, Indonesia, Myanmar and Saudi Arabia. The
company was invited to, and qualified for, the Saudi Aramco fabrication bid (US$3bn+), and
it expects to announce several contract wins in 4Q10. Assuming the historical hit rate of 15-
20% and management’s guidance that around 70% of the order amount will be booked by
Swiber, we estimate its new order flow over the next 12 months could be US$525m-700m,
which is higher than the US$400m pa it achieved in 2007-08. Recent weakness offers more attractive buying opportunity We maintain our Buy rating and DCF-based target price of S$1.40 (40% potential upside).
Trading at 9x 2011F earnings and 1.2x PB, we calculate ROE of 14% and yoy EPS growth of
70%. Our 2010F EPS is 17% below Bloomberg consensus, given our more conservative OP
margin assumption. At the current market value, the implied annual order flow is around
Key issues Below are some of the key issues addressed by management.
Swiber has US$5bn worth of tenders currently Swiber is actively participating in numerous bids, which total US$5bn in potential orders to be
reflected in revenue across three to four years. There are two to three bids in the UAE and Saudi
Arabia, around five in India, six in Indonesia and one in Myanmar. Saudi Aramco's Wasit gas field
development project has a value of around US$3bn for the offshore portion. Bid submission
period is expected to be October/November, with awards tentatively to be announced during
1Q11. Swiber-Rawabi is bidding for the entire offshore work scope (with five other bidders), but
will outsource fabrication at a local yard. Hit rate on projects is around 15-20% Hit rates differ by region. In Brunei, for example, Swiber is the resident contractor and wins almost
100% of projects commissioned. Recurring orders of US$80m-100m per annum from Brunei Shell
are not reflected in the current order book of US$915m. A blended average historical hit rate is
around 15-20%. In India, the company bid on five projects in 2009 and won three, so the hit rate
was much higher. Swiber’s competitive edge includes a good track record and experienced management A good track record in South-east Asia helps when bidding for projects, as does its young fleet
(four years average age). Swiber has good relationships with SE Asian oil majors and India's
ONGC. The current CEO of Swiber Offshore Construction Services (SOCS), Mr Nitish Gupta, is
an Indian national and formerly from JR McDermott, Swiber's main competitor globally. Swiber
recently recruited another member of management, Mr. Edward Gedeon from JR McDermott – he
is now the President of SOCS and has 37 years of industry experience. Other competitors include
Saipem, Hyundai Heavy and Nippon Steel. The latter two are mainly fabrication specialists
(Swiber intends to continue outsourcing fabrication work, which is best done at a local yard).
Swiber will also maintain its JV strategy in several regions – Saudi, Thai, and Indonesian
governments prefer companies with local partners. Swiber will focus on expanding work scope in shallow waters for the next three to five
years Swiber will continue to focus on shallow water (up to 300ft) opportunities in South-east Asia, India
and the Middle East for three to five years. The company will concentrate on expanding its work
scope to include more engineering and procurement work, as opposed to simple transportation
and installation jobs. Although engineering and procurement have lower GP margins (10-30% and
3-8%, respectively), contract amounts are large and will support revenue/earnings growth.
Transportation and installation project GP margin is around 20-30%. Swiber is moving towards
this ‘one-stop shop’ strategy partly because it is expanding into India and the Middle East, where
the oil majors who have development licences also operate field development. Swiber expects revenue of US$280m in 2H10 Management is guiding for 15-20% GP margin, 10% net margin. 2H10 revenue will be around
US$280m. Earnings will be back-heavy in 2010, unlike 2009. 4Q10 will see revenue contribution
from four projects in India, totalling about US$150m vs only one project in 4Q09, which leads to a
quarterly revenue of US$90m. Indian projects do not have high default risk, contrary to concerns Some of Swiber's competitors have tried to expand contracted work scope and have faced
bureaucratic red-tape when trying to get paid. Swiber has not had any experience of nonpayment. Swiber’s fleet expansion is complete and utilisation is at 80% Swiber has completed vessel addition for the next two years at least. It currently operates 26
directly owned vessels (book value is around US$200m), 15 vessels on sales and lease-back
is 80%, which is ideal. During 2007-08 (pre-financial crisis), Swiber saw vessel delivery delays,
which hurt project bids and executions, but this is no longer a risk, given the excess capacity at
yards. Swiber is planning for deepwater projects in the long term Swiber has set up its subsea subsidiary for this reason – to diversify into deepwater projects.
Kreuz has about 200 divers and about 50% of its US$60m-70m revenue is generated from
Swiber's projects currently. Sales and lease back agreements provide favourable vessel financing conditions Swiber pays 15-16% interest, which is still favourable versus spot rental rates. Of course, Swiber
could buy these vessels outright, but the balance sheet would be constrained. Receivables days are 90 days according to contracts Receivable days are about 90 days per project. However, timing differences make reported days
appear longer. Swiber has US$300m in debt, with no plan for equity financing, currently Swiber has US$300m in debt, with a third of this in the form of convertible bonds (five-year
maturity, 5% coupon, conversion price S$1.14). Swiber wants the CBs to be converted to lower
gearing. However, Swiber prefers debt raising to rights issues currently, as banks are offering
favourable rates. Current gearing is under 1x. Swiber expects order win announcements to increase over the next 12 months Contract wins, especially those with greater visibility and longer durations, should increase
investor confidence. Swiber considers shallow water E&P investments to be viable at oil prices above
US$60/bbl Oil prices above US$60-70/bbl for shallow water projects; above US$80/bbl for deepwater
maintain our Buy rating and S$1.40 target price.
US$195m, significantly less than the US$400m pa Swiber achieved in 2007-08.
agreements (US$500m in value), seven JV vessels, and one long-term charter. Current utilisation
projects would be sufficient.
This counter always have no stamina. Always puncture.
| edwinteo Member | Posted: 09-Sep-2010 12:25 |
 x 0  x 0 | but it seems not strong enough..if it fall in high volume then it wil be a trouble... |
swiber in top vol today..
looks like swiber is in play..
gd luck..
Swiber Holdings
Quick takes - Optimism in Middle East - by Lim Siew Khee
(SWIB SP / SWBR.SI, OUTPERFORM - Maintained, S$1.00 - Tgt. S$1.42, Oil Equipment and Services)
Maintain Outperform and target price of S$1.42 for Swiber, still based on 12x CY11 P/E (5-year peer average). We recently brought Swiber's senior management to Hong Kong. Management shared a bullish outlook for jobs available in the Middle East and Asia Pacific. Management also guided that capex will peak by end-FY10. Investors' disappointment with the company's 4Q08 and 4Q09 results was also addressed. The group has taken delivery of most vessels ordered, and a strong order book of US$915m should provide earnings visibility in FY11-12. We estimate 8-19% earnings upside if Swiber manages to bag a US$1.5bn contract from Saudi Aramco's Wasit gas development project but have left our earnings estimates unchanged for now. We believe it is safe to accumulate Swiber at current levels and see stock catalysts from a ramp-up in profits from any sizeable contract wins.
Hulumas ( Date: 07-Sep-2010 19:54) Posted:
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