Swiber Holdings

OCBC on 18 June 2012

According to Upstream, Swiber’s Indonesian unit, PT Rajawali Swiber Cakrawala (PTRSC), has won a contract worth close to US$200m linked to ConocoPhillips’ South Belut subsea development in Indonesia. However, we estimate the parent’s share of the contract to be much lower, as Swiber recently divested a 23% stake in PTRSC. The group has been successful in clinching contracts, which have generally provided short-term support on the share price but have yet to reverse its longer-term decline. However, we estimate Swiber’s order book has exceeded US$1.7b which provides greater earnings visibility. We have tweaked our estimates to incorporate our contract wins target of US$950m for this year, bumping up our fair value estimate to S$0.63 (prev. S$0.61). Maintain HOLD.

Indonesian unit may have secured US$200m contract
According to Upstream , Swiber’s Indonesian unit, PT Rajawali Swiber Cakrawala (PTRSC), has won a contract worth close to US$200m linked to ConocoPhillips’ South Belut subsea development in South Natuna Block B off Indonesia. This involves engineering, procurement, construction and installation of pipelines and subsea structures plus modification to the existing North Belut facility.

Division of work
Swiber’s unit will install 20km of pipelines plus two manifolds, umbilicals and jumpers, as well as other facilities; it has also roped in Kalimantan-based Meindo Elang Indah to handle the fabrication, hook-up and commissioning of additional topside modules at North Belut. According to Upstream, onsite installation for Swiber is targeted from 1Q14.

Interest in PTRSC has dropped to 23%
Recall that Swiber announced on 23 Apr this year that it sold a 26% stake in PTRSC for US$5.2m to PT Abadi Pelita Harapan, following which its interest in PTRSC fell to 23%. Hence its share of this latest contract win is estimated to be around US$46m (will not contribute to Swiber’s topline), and this is even before the division of work as mentioned earlier.

More contracts to come?
Upstream also reported that Swiber has emerged as the frontrunner in the tender for an offshore installation contract with Pertamina Hulu Energi for the development of the West Madura Offshore block. The group has been successful in clinching contracts, which have generally provided short-term support on the share price but have yet to reverse its longer-term decline (Exhibit 1), and this may be partly due to several earnings disappointments. However, we estimate Swiber’s order book has exceeded US$1.7b which provides greater earnings visibility. We have tweaked our estimates to incorporate our contract wins target of US$950m for this year, bumping up our fair value estimate to S$0.63 (prev. S$0.61). Maintain HOLD.