Swiber Holdings reported a 9.4% YoY fall in revenue to US$219m but saw a 143.1% increase in net profit to US$10.1m in 2Q14, boosted by one-off items. Excluding these, we estimate a core net loss of about US$8m in the quarter, such that 1H14 reported a core net loss of ~US$34m vs our full year core net loss estimate of US$31m. As mentioned in our earlier report, we had expected weak results for 2Q14 and 3Q14, unless the group clinches contracts with an immediate start date. Earnings may pick up, however, in 4Q14, which is when a significant portion of projects in order book will commence. We lower our valuation from 0.5x to 0.45x FY14F P/NTA, but may look to lift it should the group be able to lower its accounts receivables in the coming quarters. As such, our fair value estimate slips from S$0.63 to S$0.57. Maintain HOLD.
Weak 2Q14 results, as expected
Swiber Holdings reported a 9.4% YoY fall in revenue to US$219m but saw a 143.1% increase in net profit to US$10.1m in 2Q14, boosted by one-off items amounting to US$18m comprising gain on disposal of associate, JV, PPE, foreign exchange gains and fair value gain on financial instruments. Excluding these, the group saw a core net loss of about US$8m in the quarter, such that 1H14 reported a core net loss of ~US$34m vs our full year core net loss estimate of US$31m.
3Q likely to be lacklustre as well
As mentioned in our earlier report, we had expected weak results for 2Q14 and 3Q14, unless the group clinches contracts with an immediate start date. Earnings may pick up, however, in 4Q14, which is when a significant portion of projects in order book will commence. Meanwhile, it is imperative that the group continues winning contracts given its significant overheads (fixed costs including admin expenses ~US$300m/year). Net gearing has also increased from 0.91x in end FY13 to 1.45x in 2Q14, as the group issued more notes and took on finance leases to buy back a vessel that was previously on a sale and leaseback arrangement.
Receivables continue to creep up
Swiber’s trade and other receivables rose from US$877m (close to a year’s revenue) in 1Q14 to US$952m in 2Q14. According to management, a third of its trade receivables relates to regular receivables (60 days), a third relates to “change orders” and the remaining due to the percentage of completion method for accounting purposes. Management is confident of receiving payments in the coming quarters.
Already trading near half book; maintain HOLD
As of Aug 2014, the group has an order book of about US$610m, and expects to secure more contracts in the next two quarters as more bids are being submitted. We lower our valuation from 0.5x to 0.45x FY14F P/NTA, but may look to lift it should the group be able to lower its accounts receivables in the coming quarters. As such, our fair value estimate slips from S$0.63 to S$0.57. Maintain HOLD.
Swiber Holdings reported a 9.4% YoY fall in revenue to US$219m but saw a 143.1% increase in net profit to US$10.1m in 2Q14, boosted by one-off items amounting to US$18m comprising gain on disposal of associate, JV, PPE, foreign exchange gains and fair value gain on financial instruments. Excluding these, the group saw a core net loss of about US$8m in the quarter, such that 1H14 reported a core net loss of ~US$34m vs our full year core net loss estimate of US$31m.
3Q likely to be lacklustre as well
As mentioned in our earlier report, we had expected weak results for 2Q14 and 3Q14, unless the group clinches contracts with an immediate start date. Earnings may pick up, however, in 4Q14, which is when a significant portion of projects in order book will commence. Meanwhile, it is imperative that the group continues winning contracts given its significant overheads (fixed costs including admin expenses ~US$300m/year). Net gearing has also increased from 0.91x in end FY13 to 1.45x in 2Q14, as the group issued more notes and took on finance leases to buy back a vessel that was previously on a sale and leaseback arrangement.
Receivables continue to creep up
Swiber’s trade and other receivables rose from US$877m (close to a year’s revenue) in 1Q14 to US$952m in 2Q14. According to management, a third of its trade receivables relates to regular receivables (60 days), a third relates to “change orders” and the remaining due to the percentage of completion method for accounting purposes. Management is confident of receiving payments in the coming quarters.
Already trading near half book; maintain HOLD
As of Aug 2014, the group has an order book of about US$610m, and expects to secure more contracts in the next two quarters as more bids are being submitted. We lower our valuation from 0.5x to 0.45x FY14F P/NTA, but may look to lift it should the group be able to lower its accounts receivables in the coming quarters. As such, our fair value estimate slips from S$0.63 to S$0.57. Maintain HOLD.
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