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By Low Pei Han
Wed, 3 Mar 2010, 09:01:38 SGT
Swiber Holdings (Swiber) reported a 8.2% fall in revenue to US$393m in FY09, just 1% shy of our forecast. However, the group incurred a net loss of US$6.5m in 4Q09, bringing its full-year net profit to US$34.7m, underperforming ours (US$48m) and the street’s (US$49m) expectations. Although cost of sales declined by 13.8% YoY to US$99.3m in 4Q09, it was insufficient to offset the fall in revenue. After 4Q09’s dismal results, we are not expecting 1Q10 to be an especially good quarter as most of the new contracts secured will start work after 1Q10. However, the group is still bidding for more projects which it expects to be delivered within this year. Hence 2010 is likely to be back-end loaded if the wins materialize. We keep our fair value estimate of S$1.10 and maintain our HOLD rating. Incurs net loss in 4Q09. Swiber Holdings (Swiber) reported a 8.2% fall in revenue to US$393m in FY09, just 1% shy of our forecast. However, the group incurred a net loss of US$6.5m in 4Q09, bringing its full-year net profit to S$34.7m, underperforming ours (US$48m) and the street’s (US$49m) expectations. Although cost of sales declined by 13.8% YoY to US$99.3m in 4Q09, it was insufficient to offset the fall in revenue. Of this amount, chartering and subcontracting costs accounted for about 40-50% while material, labour and consumables accounted for about 25-30%. Excluding gain on disposal of PPE and assets held for sales (US$33.1m) and fair value changes on financial liabilities (US$4.5m loss), FY09 core net profit is estimated to be around US$6.1m. However with the securing of new contracts since late last year, things should get better going forward.
Benefits from penetration of new markets. We understand that penetration of the Indian and Middle Eastern markets bring along benefits besides a mere increase in revenue. Given that Swiber focused on the SE Asian market in the past, most of Swiber’s work (e.g. installation work) previously could only be done in 2Q and 3Q of the year given weather patterns. However, now work can also be done in 4Q and 1Q of the year given different monsoon seasons in the new markets.
2010 likely more back-end loaded. After 4Q09’s dismal results, we are not expecting 1Q10 to be an especially good quarter as most of the new contracts secured will start work after 1Q10. However, the group is still bidding for more projects which it expects to be delivered within this year. Hence 2010 is likely to be back-end loaded if the wins materialize. Though announcement of new contract wins may arguably be a catalyst for the stock, the market is already expecting this from the group as seen from forward estimates. Translation of these wins into actual profits may be what is needed to win over more investors.
Maintain HOLD. The group currently has an order book of about US$769m (as at 2 Mar 2010), though this includes the 5-year CUEL contract worth US$250m. Swiber expects requirements for EPCIC work to be positive in the near term though it remains vigilant at the same time. However, we have already accounted for this in our estimates. Hence we keep our fair value estimate at S$1.10 and maintain our HOLD rating.
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