Swiber Holdings (Swiber) announced that it has secured a US$273m contract through a local collaboration with Dragados Offshore for offshore construction work in the Gulf of Mexico. The undisclosed customer is likely to be PEMEX, and work entails the procurement, transportation and installation of pipeline. As this is a new market for Swiber, it is prudent to factor in contingencies for the group. However, there are unlikely to be major hiccups as Swiber Conquest has a good track record of pipe-laying and the waters where it will be executing the work is relatively shallow. We increase our peg to 12x blended FY12/13F core earnings due to improved sentiment on the sector with regards to contract wins, such that our fair value estimate rises to S$0.75 (prev. S$0.61). Meanwhile, we expect more contract wins for Swiber but this also means more funds would be needed for working capital. Maintain HOLD due to limited upside potential.
US$273m contract for Gulf of Mexico
Swiber Holdings (Swiber) announced that it has secured a US$273m contract through a local collaboration with ACS subsidiary Dragados Offshore for offshore construction work in the Gulf of Mexico. The undisclosed customer is likely to be PEMEX, and work entails the procurement, transportation and installation of pipeline. The 77-km pipeline will link the Enlace Litoral platform in the Gulf of Mexico to the Dos Bocas oil terminal in Mexico’s Tabasco state, and is scheduled to be built over a period of one year, with work commencing immediately.
Swiber Conquest to lay pipeline
The project will be executed through a consortium group with Dragados and Swiber, and we understand from management that Swiber will be doing the bulk of the work. According to newswires, Swiber’s accommodation/pipelay barge Swiber Conquest will lay the pipeline, while Dragados Offshore will contribute the use of its shops in Tampico and logistics base in Ciudad del Carmen.
Estimating 15-18% gross margins
As the US Gulf of Mexico is a new market for Swiber, it is prudent to factor in contingencies for the group. However, there are unlikely to be major hiccups as Swiber Conquest has a good track record of pipe-laying and the waters where it will be executing the work is relatively shallow. Meanwhile we are estimating gross margins of about 15-18% for this project.
Working capital to support more contract wins
As the contract falls within our new order assumption of US$850m for this year, we maintain our earnings estimate but increase our peg to 12x blended FY12/13F core earnings due to improved sentiment on the sector with regards to contract wins, such that our fair value estimate rises to S$0.75 (prev. S$0.61). Looking ahead, we expect more contract wins for Swiber but this also means more funds would be needed for working capital. Maintain HOLD due to limited upside potential.
Swiber Holdings (Swiber) announced that it has secured a US$273m contract through a local collaboration with ACS subsidiary Dragados Offshore for offshore construction work in the Gulf of Mexico. The undisclosed customer is likely to be PEMEX, and work entails the procurement, transportation and installation of pipeline. The 77-km pipeline will link the Enlace Litoral platform in the Gulf of Mexico to the Dos Bocas oil terminal in Mexico’s Tabasco state, and is scheduled to be built over a period of one year, with work commencing immediately.
Swiber Conquest to lay pipeline
The project will be executed through a consortium group with Dragados and Swiber, and we understand from management that Swiber will be doing the bulk of the work. According to newswires, Swiber’s accommodation/pipelay barge Swiber Conquest will lay the pipeline, while Dragados Offshore will contribute the use of its shops in Tampico and logistics base in Ciudad del Carmen.
Estimating 15-18% gross margins
As the US Gulf of Mexico is a new market for Swiber, it is prudent to factor in contingencies for the group. However, there are unlikely to be major hiccups as Swiber Conquest has a good track record of pipe-laying and the waters where it will be executing the work is relatively shallow. Meanwhile we are estimating gross margins of about 15-18% for this project.
Working capital to support more contract wins
As the contract falls within our new order assumption of US$850m for this year, we maintain our earnings estimate but increase our peg to 12x blended FY12/13F core earnings due to improved sentiment on the sector with regards to contract wins, such that our fair value estimate rises to S$0.75 (prev. S$0.61). Looking ahead, we expect more contract wins for Swiber but this also means more funds would be needed for working capital. Maintain HOLD due to limited upside potential.
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