Swiber Holdings (Swiber) reported a 59.3% YoY rise in revenue to US$309.7m and a significant rise in net profit from US$8.6m in 1Q12 to US$20.1m in 1Q13. Both revenue and pre-tax profit formed 27% of our full-year estimates, but the lower-than-expected tax rate meant that net profit accounted for 38% of our full-year forecast. What was encouraging, however, was that earnings quality was high in the quarter, with core net profit estimated to be around S$19.7m. Swiber’s share price has dropped by about 13% since its high of S$0.715 in end Jan. We tweak our estimates to account for lower disposal gains and higher associates’ earnings contributions, resulting in a higher fair value estimate of S$0.86 (prev. S$0.70). The stock is currently trading at 5.5- 6.0x core FY13-14F earnings and 0.6x P/NTA. Upgrade to BUY based on valuation grounds.
Good 1Q13 results
Swiber Holdings (Swiber) reported a 59.3% YoY rise in revenue to US$309.7m and a significant rise in net profit from US$8.6m in 1Q12 to US$20.1m in 1Q13. Both revenue and pre-tax profit formed 27% of our full-year estimates, in line with our expectations, but the lower-than-expected tax rate meant that net profit accounted for 38% of our full-year forecast. Gross profit margin was 16.1% in 1Q13 vs 19.8% in 1Q12, but only slightly lower than 4Q12’s 16.5%.
Good earnings quality, but still monitoring other metrics
What was encouraging to us in this latest set of results was that earnings quality was high in the quarter, with core net profit estimated to be around S$19.7m, a level not seen since 2Q08. We have seen a climb (though somewhat bumpy) in recurring earnings for the past five to six quarters, and the company may be starting to regain footing in terms of earnings quality. Still, the level of indebtedness and cash flow remains an aspect we would monitor. Net gearing has increased from 0.95x in 4Q12 to 1.0x in 1Q13; the highest level seen so far was 1.06x in 2Q11.
Upgrade to BUY
Swiber’s order book stands at about US$1.1b as at May, vs US$1.35b as at end Feb 2013. About US$500m of its order book would be recognized in FY13, and US$300m in FY14. Meanwhile its share price has dropped by about 13% since its high of S$0.715 in end Jan. We tweak our estimates to account for lower disposal gains and higher associates’ earnings contributions, resulting in a higher fair value estimate of S$0.86 (prev. S$0.70), based on an unchanged peg of 8x FY13F core earnings. The stock is currently trading at 5.5- 6.0x core FY13-14F earnings and 0.6x P/NTA. Upgrade to BUY based on valuation grounds.
Swiber Holdings (Swiber) reported a 59.3% YoY rise in revenue to US$309.7m and a significant rise in net profit from US$8.6m in 1Q12 to US$20.1m in 1Q13. Both revenue and pre-tax profit formed 27% of our full-year estimates, in line with our expectations, but the lower-than-expected tax rate meant that net profit accounted for 38% of our full-year forecast. Gross profit margin was 16.1% in 1Q13 vs 19.8% in 1Q12, but only slightly lower than 4Q12’s 16.5%.
Good earnings quality, but still monitoring other metrics
What was encouraging to us in this latest set of results was that earnings quality was high in the quarter, with core net profit estimated to be around S$19.7m, a level not seen since 2Q08. We have seen a climb (though somewhat bumpy) in recurring earnings for the past five to six quarters, and the company may be starting to regain footing in terms of earnings quality. Still, the level of indebtedness and cash flow remains an aspect we would monitor. Net gearing has increased from 0.95x in 4Q12 to 1.0x in 1Q13; the highest level seen so far was 1.06x in 2Q11.
Upgrade to BUY
Swiber’s order book stands at about US$1.1b as at May, vs US$1.35b as at end Feb 2013. About US$500m of its order book would be recognized in FY13, and US$300m in FY14. Meanwhile its share price has dropped by about 13% since its high of S$0.715 in end Jan. We tweak our estimates to account for lower disposal gains and higher associates’ earnings contributions, resulting in a higher fair value estimate of S$0.86 (prev. S$0.70), based on an unchanged peg of 8x FY13F core earnings. The stock is currently trading at 5.5- 6.0x core FY13-14F earnings and 0.6x P/NTA. Upgrade to BUY based on valuation grounds.
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