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Swiber Holdings
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Pinnacle
Master |
15-Nov-2007 14:38
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CIMB - Swiber Holdings (S$3.36) - 3QFY07 results ? Becoming a driller Within expectations. 3Q07 core net profit of US$11.9m (+124% yoy) was in line with our expectations and consensus. 9M07 core earnings of US$21.2m form 65% of our FY07 estimate and 40% of consensus (US$53m). 4Q07 is expected to be stronger from the completion of projects in Indonesia and Malaysia and higher milestones reached for Brunei Shell. 3Q07 revenue grew 55% yoy to US$45.4m. Significant margin expansion from enlarged fleet. 3Q07 gross margin grew 680bp to 34%, driven by an increase in the number of owned vessels which reduced third-party chartering costs. Swiber currently operates 21 vessels vs. only 10 in FY06. Becoming a driller. The group also unveiled plans to add a deepwater drilling barge, Equatorial Drilling, to its fleet. The barge is designed for equatorial drilling conditions in South-East Asia with a benign environment. With a drilling capacity of up to 25,000ft and water depth of 6,000ft, it is slightly shallower than a typical semi-submersible (drilling depth of 30,000ft and water depth of 10,000ft). Construction of the barge should start in 2Q08 and will be completed by 1Q2010. No financial or shipyard details were given but management guided that 80% of the cost will be funded by bank borrowings. We estimate the barge cost at US$190m-250m. Assuming day rates remain at US$450,000/day (current starting rate for semi-submersibles operating at 5,000-7,500ft in South-East Asia) and an EBITDA margin of 40% on 90% utilisation, the barge could lift Swiber?s operating profit by US$60m per annum from FY2010 onwards. More positive newsflow from US$31m order. Separately, Swiber announced a US$31m letter of intent for platform installation work for an Indonesian oil conglomerate. The job will be carried out from Apr 08 till Aug 08. Order book should reach US$225m while outstanding bids stand at US$745m. We are leaving our earnings estimates intact as the contract win falls within our assumptions. Maintain Outperform; higher target price of S$5.05 from S$3.95, as we roll forward our 15x P/E to CY09. Swiber is trading at undemanding valuations for its 117% 3-year CAGR in earnings. Our valuation excludes earnings contributions from the drilling barge. Short-term catalysts could include a stronger 4Q07, contract wins and margin enhancement. Key risks are delays in fleet deliveries, loss of key management and a sudden collapse in offshore E&P spending. |
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Pinnacle
Master |
15-Nov-2007 14:09
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DBS Vickers - Rising gross profit margin Buy S$3.36; Price Target : S$ 4.18 Swiber?s net profit jumped 270% y-o-y to US$19.7m in 3Q07, which is in line with our observation that Swiber?s second half results will be significantly stronger on an h-o-h basis due to the recognition period for secured offshore EPCIC contracts. Indeed, Swiber?s net profit had jumped 274% y-o-y to US$29.7m in 9M07, and is on target to meet our FY07 net profit estimate of US$54.4m. More importantly, Swiber?s gross profit margin had risen 4.6ppt q-o-q to 34.0% in 3Q07, the third consecutive quarter of q-o-q increase. It is in line with the higher margins captured in-house due to its larger offshore support fleet. |
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