Swiber Holdings

Kim Eng on 16 Dec 2014

• Secures USD710m contract for offshore field development in West Africa, a new market.
•  Bumps up YTD new orders from 4-year low of USD315m to USD1.03b. Cut FY15E net loss to USD5.9m from USD15.8m. TP up slightly to SGD0.35 from SGD0.34, still at 0.3x P/BV trough.
• Maintain HOLD pending evidence of order sustainability or successful execution in Africa.

What’s New
Swiber broke its long order drought by announcing a new contract of USD710m. This is for Engineering, Procurement, Construction, Installation and Commissioning services for an offshore field development in West Africa, awarded by a Houston-based oil company. It bumps up its YTD new contracts from USD315m to USD1.03b and order book from a 4-year low of USD526m as at
3Q14.

What’s Our View
The contract marks the group’s maiden foray into West Africa and comes at a crucial time of fast order-book depletion. Still, its order-win ability is questionable, especially with weakening oil prices. There might also be risks of executing this large contract in a new market.

After factoring in conservative estimates for this contract, we are still looking at a net USD5.9m loss for FY15E, albeit smaller than our original loss forecast of USD15.8m. FY16E net loss of USD1.8m has been transformed to a net profit of USD28.7m. With the adjustments, our TP climbs to SGD0.35 from SGD0.34, still at a 0.3x FY15E P/BV trough.

Maintain HOLD pending evidence of order sustainability or successful execution in Africa.