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Report from BT 16/11/2006
Have investors overlooked Swissco?
By VEN SREENIVASAN
IT IS not uncommon for companies with compelling valuation and growth stories to glide under the radar screens of investors. And offshore and marine vessels and services specialist Swissco International appears to be a case in point.
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Originally a ship chandler, Swissco ventured from selling ship's supplies and equipment into the business of chartering offshore support vessels (OSVs) to oil companies in the early 1990s. It now has 14 OSVs and aims to have 30-35 in two years' time.
But the offshore and marine vessel and services specialist appears to be sitting on a gold mine, thanks to the high-octane share price performance of its recently listed associate Swiber Holdings.
Swiber, a company that specialises in offshore pipelines, installing jackets or topsides for rigs, raised about $31 million in net proceeds through the issue of 94 million new shares at 35.5 cents a share two weeks ago.
Since then, the share price has more than doubled to about 72-73 cents. Swissco has about 55 million shares in Swiber. And at Swiber's current market price, this is worth almost $40 million - a huge gain from the $2 million still carried in Swissco's books.
Swissco's other assets include its fleet of OSVs with an estimated market value of about $47 million. It also owns assets at its yard in the Pandan Road area.
Just based on Swiber and the marine vessels, Swissco's assets are worth around $87 million. Its market capitalisation at the moment is around $85 million.
This means the stock is trading at a discount to its net book value.
For comparison, industry peer Jaya Holdings was recently acquired for about 3.5 times its book value. And Ezra is currently trading at more than five times book value.
Swissco also seems compelling on a price-earnings (PE) basis.
Stripping away the cash value of Swiber, Swissco's PE multiple on its 2005 earnings is only about three times. In comparison, similar companies like Jaya Holdings, ASL Marine, Labroy and Ezra trade at 10-15 times' earnings.
Swissco earned $12.5 million last financial year, though this included vessel disposal gains of $9.5 million.
The demand for OSVs has been so strong that Swissco has been making handsome premiums on selling some of its new boats. It has raised $22 million from boat sales over the past two years and reinvested the funds in new vessels. The company now has seven OSVs under construction at yards in China, including four anchor handling tugs (AHTs) that help moor offshore rigs and platforms.
'We can't build ships fast enough for the industry,' chief executive Alex Yeo told BT recently, saying an offshore boom has created an immediate shortage of about 100 OSVs. Swissco is capitalising on this shortage.
Not surprisingly, some market experts expect the company to enjoy a significant boost in full-year 2006 earnings.
Swissco is smack in the centre of a very sweet spot of an industry up-cycle. And to make things even sweeter, it is also sitting on a cash pile of $40 million, thanks to Swiber.
Swissco's stock has been largely range-bound in recent weeks. But judging from an increase in activity in the past few days, some players may have started to take notice of its underlying value.
IT IS not uncommon for companies with compelling valuation and growth stories to glide under the radar screens of investors. And offshore and marine vessels and services specialist Swissco International appears to be a case in point.
|
Originally a ship chandler, Swissco ventured from selling ship's supplies and equipment into the business of chartering offshore support vessels (OSVs) to oil companies in the early 1990s. It now has 14 OSVs and aims to have 30-35 in two years' time.
But the offshore and marine vessel and services specialist appears to be sitting on a gold mine, thanks to the high-octane share price performance of its recently listed associate Swiber Holdings.
Swiber, a company that specialises in offshore pipelines, installing jackets or topsides for rigs, raised about $31 million in net proceeds through the issue of 94 million new shares at 35.5 cents a share two weeks ago.
Since then, the share price has more than doubled to about 72-73 cents. Swissco has about 55 million shares in Swiber. And at Swiber's current market price, this is worth almost $40 million - a huge gain from the $2 million still carried in Swissco's books.
Swissco's other assets include its fleet of OSVs with an estimated market value of about $47 million. It also owns assets at its yard in the Pandan Road area.
Just based on Swiber and the marine vessels, Swissco's assets are worth around $87 million. Its market capitalisation at the moment is around $85 million.
This means the stock is trading at a discount to its net book value.
For comparison, industry peer Jaya Holdings was recently acquired for about 3.5 times its book value. And Ezra is currently trading at more than five times book value.
Swissco also seems compelling on a price-earnings (PE) basis.
Stripping away the cash value of Swiber, Swissco's PE multiple on its 2005 earnings is only about three times. In comparison, similar companies like Jaya Holdings, ASL Marine, Labroy and Ezra trade at 10-15 times' earnings.
Swissco earned $12.5 million last financial year, though this included vessel disposal gains of $9.5 million.
The demand for OSVs has been so strong that Swissco has been making handsome premiums on selling some of its new boats. It has raised $22 million from boat sales over the past two years and reinvested the funds in new vessels. The company now has seven OSVs under construction at yards in China, including four anchor handling tugs (AHTs) that help moor offshore rigs and platforms.
'We can't build ships fast enough for the industry,' chief executive Alex Yeo told BT recently, saying an offshore boom has created an immediate shortage of about 100 OSVs. Swissco is capitalising on this shortage.
Not surprisingly, some market experts expect the company to enjoy a significant boost in full-year 2006 earnings.
Swissco is smack in the centre of a very sweet spot of an industry up-cycle. And to make things even sweeter, it is also sitting on a cash pile of $40 million, thanks to Swiber.
Swissco's stock has been largely range-bound in recent weeks. But judging from an increase in activity in the past few days, some players may have started to take notice of its underlying value.
Originally a ship chandler, Swissco ventured from selling ship's supplies and equipment into the business of chartering offshore support vessels (OSVs) to oil companies in the early 1990s. It now has 14 OSVs and aims to have 30-35 in two years' time.
But the offshore and marine vessel and services specialist appears to be sitting on a gold mine, thanks to the high-octane share price performance of its recently listed associate Swiber Holdings.
Swiber, a company that specialises in offshore pipelines, installing jackets or topsides for rigs, raised about $31 million in net proceeds through the issue of 94 million new shares at 35.5 cents a share two weeks ago.
Since then, the share price has more than doubled to about 72-73 cents. Swissco has about 55 million shares in Swiber. And at Swiber's current market price, this is worth almost $40 million - a huge gain from the $2 million still carried in Swissco's books.
Swissco's other assets include its fleet of OSVs with an estimated market value of about $47 million. It also owns assets at its yard in the Pandan Road area.
Just based on Swiber and the marine vessels, Swissco's assets are worth around $87 million. Its market capitalisation at the moment is around $85 million.
This means the stock is trading at a discount to its net book value.
For comparison, industry peer Jaya Holdings was recently acquired for about 3.5 times its book value. And Ezra is currently trading at more than five times book value.
Swissco also seems compelling on a price-earnings (PE) basis.
Stripping away the cash value of Swiber, Swissco's PE multiple on its 2005 earnings is only about three times. In comparison, similar companies like Jaya Holdings, ASL Marine, Labroy and Ezra trade at 10-15 times' earnings.
Swissco earned $12.5 million last financial year, though this included vessel disposal gains of $9.5 million.
The demand for OSVs has been so strong that Swissco has been making handsome premiums on selling some of its new boats. It has raised $22 million from boat sales over the past two years and reinvested the funds in new vessels. The company now has seven OSVs under construction at yards in China, including four anchor handling tugs (AHTs) that help moor offshore rigs and platforms.
'We can't build ships fast enough for the industry,' chief executive Alex Yeo told BT recently, saying an offshore boom has created an immediate shortage of about 100 OSVs. Swissco is capitalising on this shortage.
Not surprisingly, some market experts expect the company to enjoy a significant boost in full-year 2006 earnings.
Swissco is smack in the centre of a very sweet spot of an industry up-cycle. And to make things even sweeter, it is also sitting on a cash pile of $40 million, thanks to Swiber.
Swissco's stock has been largely range-bound in recent weeks. But judging from an increase in activity in the past few days, some players may have started to take notice of its underlying value.