By Carmen Lee
Fri, 6 Feb 2009, 08:16:43 SGT

Market Pulse: Swiber & SATS (6 Feb 2009)

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Swiber Holdings: Hidden value in stock price

Summary: Swiber Holdings (Swiber) is a service provider in the offshore oil and gas industry, offering offshore EPCIC, marine support and drilling services across the Asia Pacific and the Middle East. With the drastic fall in oil prices, Swiber is unlikely to be spared by cut-backs on E&P expenditures from oil companies, but it should be kept busy for this year with its strong order book of US$607m (last announced 30 Sep 08). Swiber is still bidding for US$4.2b worth of contracts for execution over the next five years and we account a 15% (historically ~20%) win rate, translating to US$630m worth of possible contracts. We are mindful that contract flow might be slow in 1H09 due to the cautious outlook on oil but any wins will be a positive share price catalyst. The stock has fallen more than 85% since Jan 08 and we see limited downside risk. Swiber is currently trading at its historical low valuation of ~2x FY09F earnings. We initiate coverage on Swiber with a BUY recommendation and S$0.66 fair value estimate. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.com for detailed report.

SATS Limited: Recessionary conditions hampered 3QFY09 earnings

Summary: Singapore Airport Terminal Services Limited (SATS) released its 3QFY09 results yesterday, with revenue down 0.9% YoY (-2.7% QoQ) to S$242.4m due to contraction in passenger traffic and cargo demand. Despite the maiden sales contribution from its two newly-acquired subsidiaries (Country Foods Macau and SATS Hong Kong), higher operating expenses, lower share of associates’ profit and other non-operating income created a substantial drag on its earnings. Consequently, 3QFY09 PATMI fell 25.4% YoY (-16.0% QoQ) to S$37.6m. For 9MFY09, revenue grew 3.0% to S$735.6m, meeting 77.8% of consensus sales forecast, while its PATMI dipped 28.8% to S$104.5m, or 82.3% of consensus estimate. In the coming quarter (4QFY09), management expects to see lesser business volumes amid the deteriorating global economy, but expects its ongoing capacity reduction and costs trimming measures to mitigate the slowdown. Following the approval by its minority shareholders to acquire 69.61% stake in Singapore Food Industries (SFI) on 20 Jan 2009, SATS will also be proceeding with its mandatory unconditional cash offer for all of the remaining SFI shares. With the acquisition projected to complete by 4QFY09, consolidation of SFI is expected from the quarter. We do not have a rating on the stock. (Kevin Tan)

NEWS HEADLINES

- According to Spring Singapore, there is at least a 60% increase in government-backed loans approved last month, suggesting that credit may be loosening in the lending system.

- The US Senate agreed to dilute a “Buy American” clause from its stimulus plan that angered US allies, but refused to strip it from the bill.

- Raffles Education posted a 66% YoY rise in net profit to S$27m for 2Q09 while revenue rose 38% to S$54.2m.

- CH Offshore reported a 229% YoY rise in net profit to US$16.3m for 2Q09 while revenue doubled to US$18.2m. Major contributions came from four new AHTS vessels that were delivered last year.

- Magnus Energy Group is expecting to report a loss for 1H09, mainly due to impairment loss of oil concession rights and exchange losses.

- Chuan Hup Holdings said its 2Q09 and 1H09 results will show a significant loss, mainly due to loss on disposal of investments and mark-to-market devaluation of investments in securities.

- Transcu Group has launched its new and improved Electore range of cosmetics products in Tokyo.

- Indiabulls Properties Investment Trust has secured a 2b rupee four-year term loan for its One Indiabulls Centre property in Mumbai.

- Tuan Sing’s revenue fell 25% to S$242.2m and net profit fell 98% to S$2.3m for FY08.