Net profit doubled to US$25.6 million in 1Q on a 59.3% increase in revenue to US$309.7 million


Analyst: Lim Siew Khee

What Happened 

Upstream reported that Swiber is preparing to invest as much as US$500m to build a deep-water offshore construction vessel. The company has floated a newbuild tender for a 4,000-tonne crane vessel with S-lay, reel lay and flex-lay systems. According to Upstream, at least eight yards have been shortlisted for the tender with a contract value of US$400m-500m.    
 

Management is non-committal on the news but stated that deep-water is an eventuality. The company is only at the preliminary stage of evaluating the newbuild project. If it goes ahead, we believe that Swiber is likely to choose Chinese yards that provide favourable financing with low upfront payment. Assuming tail-heavy payment terms, a cash call is likely in 2015/2016, nearer to delivery, in our view.

Swiber has a fleet of about 62 vessels currently (12 units under sale and leaseback, 27 units via JVs and 23 units 100% owned). The new deepwater addition will be similar to Ezra’s iced-class subsea construction vessel, Lewek Constellation (about US$420m). We make no changes to our EPS forecasts as the news is not confirmed and the project, if it goes ahead, can only start contributing in FY16/17.    
 

The stock is cheap at 7.4x CY14 P/E and 0.7x P/BV vs. Singapore OSV’s average of about 1.1x P/BV and 9x CY14 P/E.