Swiber and Suntec (14 Jun 2010)

By Carmen Lee
Mon, 14 Jun 2010, 08:38:07 SGT

Market Pulse: Swiber and Suntec (14 Jun 2010)

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Swiber Holdings: More opportunities in the pipeline

Summary: Saudi Aramco is set to invite bids for at least US$1b of offshore fabrication work related to its Wasit gas programme. It is possible that Swiber may participate in the bidding, considering it is also looking at opportunities in the Middle East and has a JV partner in Rawabi Holding, a Saudi Arabian company that may increase its bidding chances. India’s ONGC has also re-opened the EPIC tender for its US$1.3b B-193 cluster fields’ development, providing more opportunities for contractors. Demand for field development work in Asia and the Middle East remains strong, although competition during the bidding process is fierce as well. Swiber has already gained a strong foothold in Malaysia, Brunei and India. Should it replicate its success in the Middle East, its prospects should be even brighter, assuming good cost control. With a stronger order book and a bright outlook for offshore field development, we maintain our BUY rating and S$1.38 fair value estimate. Risks include disruptions due to unexpected events, leading to cost overruns and lost revenue. (Low Pei Han)

Suntec REIT: Positive retail developments and opportunities

Summary: The new Circle Line MRT stations could boost pedestrian traffic to Suntec REIT’s retail malls. Retail trends are also positive with MasterCard cardholders spending a total of US$44.3m over the first weekend of the Great Singapore Sale (GSS), up 18% YoY. Consumer confidence is also up. We expect the S-REIT sector to employ asset enhancement initiatives as a key strategy to grow portfolio income this year. Suntec’s AEI plans for Park Mall have been on the backburner due to the financial crisis and this might be an opportune year to re-launch the initiative. These positive retail developments are, of course, offset by the challenges faced by Suntec’s office portfolio. Still, valuations are attractive from a price-to-book perspective. Maintain BUY and S$1.44 fair value (17.7% estimated total return). (Meenal Kumar)

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NEWS HEADLINES

- CapitaMalls Asia said it could sell up to 904.5m shares or 67% of its new CapitaMalls Malaysia Trust.

- Armstrong Industrial Corp’s major shareholder has been approached by a third party interested in making an offer for the shares or business of the company.

- SPH will be acquiring Eastern Holdings’ exhibition business for S$43.5m.

- Seroja Investments has set up a JV with a Chinese company to own a dry-bulk vessel and engage in chartering activities.

- A unit of ST Engineering, together with a Brunei partner, has won a S$66.5m contract from the Brunei Economic Development Board.

- Enzer Corporation will buy a unit of Swiber which owns a US$7.5m vessel.

- Xpress Holdings reported a 15.2% YoY drop in 3Q10 net profit to S$1.66m.

Please refer to the full report for more information and additional disclosures.

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