Swiber Holdings

OCBC on 16 Aug 2012

Swiber Holdings (Swiber) reported a 27.1% YoY rise in revenue to US$229.6m and a 103.9% increase in net profit to US$15.1m in 2Q12, boosted by one-off gains of about US$10m. 1H12 revenue and core net profit accounted for about 55% and 57% of our full year estimate, largely within our expectations. The group has been active in the bond market in the past few months, which is not surprising given the amount of debt obligations that are coming up. As of Aug 2012, the group’s order book stood at about US$1.6b and is expected to contribute to results over the next two years. Looking ahead, Swiber is still bidding for more projects in the pipeline given the positive industry outlook. However, given limited upside potential, we maintain our HOLD rating on the stock with a fair value estimate of S$0.66 (prev. S$0.63).

2Q12 results largely in line
Swiber Holdings (Swiber) reported a 27.1% YoY rise in revenue to US$229.6m and a 103.9% increase in net profit to US$15.1m in 2Q12, boosted by one-off gains such as disposals, fair value changes in financial derivatives and forex gains of about US$10m. 1H12 revenue and core net profit accounted for about 55% and 57% of our full year estimate, largely within our expectations. Gross profit margin fell slightly from 14.7% in 2Q11 to 14.2% in 2Q12. The group is also seeing traction from its associates and JVs which contributed US$4.1m in the quarter vs US$2.5m in 1Q12 and a loss in 2Q11.

Tapping debt market recently
The group has been active in the bond market in the past few months, issuing a total of S$320m worth of bonds since Jun. This is not surprising as S$170m of bonds will mature by end Oct this year, in addition to US$100m of convertible loan notes that may be redeemed on 16 Oct. As the conversion price of S$0.84 is more than 35% above the current price, the convertible notes are likely to be redeemed. We estimate that the group has tapped S$690m out of its S$700m MTN programme, but there should be room for more debt issuance after repayment of S$170m worth of bonds by end Oct. Meanwhile, current borrowings stood at US$373.0m with a cash balance of US$129.2m as at 30 Jun 2012.

Bidding for more projects
As of Aug 2012, the group’s order book stood at about US$1.6b and is expected to contribute to results over the next two years. Looking ahead, the group is still bidding for more projects in the pipeline given the positive industry outlook. We have fine-tuned our estimates and our fair value estimate has now increased to S$0.66 (prev. S$0.63). Given limited upside potential, we maintain our HOLD rating on the stock.