Swiber Holdings (Swiber) reported a 92.6% YoY rise in revenue to US$265.3m but saw a 45.8% fall in net profit to US$7.3m in 3Q12, such that 9M12 net profit accounted for about 80% of our full year estimates, within expectations. Gross margin declined from 16.6% in 3Q11 to 14.1% in 3Q12, but was similar to 2Q12’s 14.2%. Meanwhile, net debt to equity rose from 0.89x in Jun 2012 to 1.00x in Sep 2012. As of Nov 2012, Swiber’s order book stood around US$1.4b vs. US$1.6b as at Aug. The group has also proposed an interim dividend of S$0.01/share. Meanwhile, we would be monitoring the group’s operating cashflows. Maintain HOLD with slightly lower fair value estimate of S$0.65 (prev. S$0.66).
3Q12 net profit within expectations
Swiber Holdings (Swiber) reported a 92.6% YoY rise in revenue to US$265.3m but saw a 45.8% fall in net profit to US$7.3m in 3Q12, such that 9M12 net profit accounted for about 80% of our full year estimates, within expectations. The strong growth in revenue was driven by progressive recognition of offshore construction contracts in South Asia, SE Asia and Latin America. Gross margin declined from 16.6% in 3Q11 to 14.1% in 3Q12, but was similar to 2Q12’s 14.2%. Meanwhile, net debt to equity rose from 0.89x in Jun 2012 to 1.00x in Sep 2012.
Monitoring cash flows
The group has been seeing negative operating cashflows for the past five quarters, and the amount increased to US$144m in 3Q12. A main reason behind this is a significant increase in trade receivables in the quarter (from US$370m in 2Q12 to US$511m n 3Q12). We understand that a significant portion of this relates to contracts executed for PEMEX and the amount is likely to fall in 4Q12 as more cash is received from the client. According to management, PEMEX is a good pay master.
Maintain HOLD
As of Nov 2012, Swiber’s order book stood around US$1.4b vs. US$1.6b as at Aug. The group is also bidding for more projects in the pipeline given the positive industry outlook. However, in order for the stock to re-rate, we think the group has to demonstrate that it is able to grow its operations by the generation of sustainable operating cash flows besides the support of leverage. Meanwhile the group has proposed an interim dividend of S$0.01/share, payable by 18 Jan 2013. We roll forward our valuations and based on 8x FY13F core earnings, our fair value estimate eases slightly from S$0.66 to S$0.65. Maintain HOLD.
Swiber Holdings (Swiber) reported a 92.6% YoY rise in revenue to US$265.3m but saw a 45.8% fall in net profit to US$7.3m in 3Q12, such that 9M12 net profit accounted for about 80% of our full year estimates, within expectations. The strong growth in revenue was driven by progressive recognition of offshore construction contracts in South Asia, SE Asia and Latin America. Gross margin declined from 16.6% in 3Q11 to 14.1% in 3Q12, but was similar to 2Q12’s 14.2%. Meanwhile, net debt to equity rose from 0.89x in Jun 2012 to 1.00x in Sep 2012.
Monitoring cash flows
The group has been seeing negative operating cashflows for the past five quarters, and the amount increased to US$144m in 3Q12. A main reason behind this is a significant increase in trade receivables in the quarter (from US$370m in 2Q12 to US$511m n 3Q12). We understand that a significant portion of this relates to contracts executed for PEMEX and the amount is likely to fall in 4Q12 as more cash is received from the client. According to management, PEMEX is a good pay master.
Maintain HOLD
As of Nov 2012, Swiber’s order book stood around US$1.4b vs. US$1.6b as at Aug. The group is also bidding for more projects in the pipeline given the positive industry outlook. However, in order for the stock to re-rate, we think the group has to demonstrate that it is able to grow its operations by the generation of sustainable operating cash flows besides the support of leverage. Meanwhile the group has proposed an interim dividend of S$0.01/share, payable by 18 Jan 2013. We roll forward our valuations and based on 8x FY13F core earnings, our fair value estimate eases slightly from S$0.66 to S$0.65. Maintain HOLD.
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