Swiber   

Swiber - not affected by subprime woes

3Q07 core net profit of US$11.9m (+124% yoy) was in line withour 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 fromthe completion of projects in Indonesia and Malaysia and higher milestones reached forBrunei Shell. 3Q07 revenue grew 55% yoy to US$45.4m.

3Q07 gross margin grew 680bp to34%, driven by an increase in the number of owned vessels which reduced 3rd party chartering costs. Swiber currently operates 21 vessels vs. only 10 in FY06. The group also unveiled plans to add a deepwater drilling barge, Equatorial Drilling, to its fleet. The barge is designed forequatorialdrilling conditionsin 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 1Q10.

No financial or shipyard details were given but management guided that 80% of the cost will be funded by bank borrowings. CIMB 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 FY10 onwards.

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. They are leaving their earnings estimates intact as the contract win falls within their assumptions.

Maintain Outperform; higher target price of $5.05 from $3.95, as CIMB roll forward their 15x P/E to CY09. Swiber is trading at undemanding valuations for its 117% 3-year CAGR in earnings. Their 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.

 

Part 1 of my analysis and review of Swiber's 3Q 2007 has been posted on my blog at http://sgmusicwhiz.blogspot.com. Please kindly visit and feel free to leave comments, thanks !

 

result out 2moro....DOW up up up....so pray hard that this will go up to 3.7 or even higher!!!! 2moro will be green green day.....opportunities all over, be it to short or sell...or buy!

 

Singapore's Swiber unit wins 25 million usd drilling contract in Thailand      11/13/2007 12:54:00 PM

SINGAPORE (Thomson Financial) - Swiber Holdings Ltd, a provider of engineering services to the oil and gas industry, said Tuesday its Swiber Offshore Drilling Pte Ltd unit had won its maiden offshore drilling contract in the Gulf of Thailand worth 25 million US dollars The 12-month contract, which will start in March 2008, can be extended for another 12 months. The offshore drilling business is expected to be a key growth engine for the company in the future, Swiber said. (1 US dollar = 1.45 Singapore dollars) yuinmunn.szetoh@thomson.com MMMM

 

Dear all, I have prepared an analysis and review of Swiber's latest purchase of 4 vessels for US$108 million on my blog at http://sgmusicwhiz.blogspot.com. Feel free to visit and leave comments, thanks !

 

Whatever the case, the outlook for next 2-3 years for this industry is very promising....

The price will only move up if nothing serious go wrong operationally...

The TP has been adjusted upward few times this year.  

 

Anyone to comment on this stock? to go short or long? if long, what would be the best entry level? thanks!

 

It's good for near and long term...Vietnam oil and gas industry has been booming with alot of big projects coming up, especially 2008....

Swiber really put himself in a favourable position to tap into these markets.

Worth buying when price is weak during correction.


 

 

Swiber enters cooperation agreements with Petrovietnam Construction Joint Stock Company and Vietsovpetro Joint Venture to tap oil and gas market in Vietnam

-Partnership with the two state-linked companies will lead to creation of new opportunities and extended market reach for Swiber


SINGAPORE ? 26 September 2007 ? Swiber Holdings Limited (?Swiber? or together
with its subsidiaries, the ?Group?), an integrated offshore Engineering, Procurement,
Construction, Installation and Commission (?EPCIC?) contractor with a complementary
business in the supply of marine support vessels, today announced that it has entered into
broad cooperation agreements with two Vietnamese state-linked oil and gas companies -
Vietnam-listed Petrovietnam Construction Joint Stock Company (?PVC?) and
Vietsovpetro Joint Venture (?VSP?).
The non-exclusive cooperation agreement paves the way for Swiber, PVC and VSP to
jointly explore opportunities for exchanging information, cooperation, and technical
assistance in order to foster mutual development and strengthening of the parties? position
in the oil and gas industry in Vietnam and overseas.
PVC is a subsidiary of the national oil and gas corporation, Vietnam Oil & Gas
Corporation (?PetroVietnam?). The latter, established in 1975, is a state-owned holding
company responsible for all the oil and gas resources in Vietnam. PetroVietnam?s
activities, through its various companies and wholly owned subsidiaries, covers the full spectrum of oil and gas operations from oil and gas exploration and production to storage,
processing, transportation, distribution and services.
PVC was started in 1983 to create a niche business specializing in providing engineering
and construction activities for the oil and gas sector. With a staff strength of approximately
2,000, PVC designs and supplies steel structures, pipelines and process pipings, petroleum
storage products for onshore and offshore oil and gas projects.
VSP is a joint venture company established in 1981 between the governments of Vietnam
and the former Soviet Union. The company is involved in Exploration and Production
activities and has produced over 150 million tonnes of oil from its concessions in Vietnam.
In addition, VSP has a services arm that provides a wide range of offshore services in
support of its own and other Oil and Gas companies working in Vietnam. These services
consist of Drilling, Geophysics, Construction, Maintenance, Marine transport, and related
administrative divisions , which in total employ over 6,000 personnel.
The 3-year cooperation agreement will extend the reach of Swiber to Vietnam for the very
first time.

?This strategic collaboration is part of Swiber?s efforts to extend our reach to new markets.
The agreement has established the start of our strategic partnership with these two
Vietnamese companies and we believe this will set the stage for more future dealings to come. With the experience and track record of PVC and VSP, we are confident that they
can help establish Swiber?s presence in Vietnam,? added Mr Goh.
Just recently, on 14 September 2007, Swiber announced that it has signed a Memorandum
of Understanding with Rahaman Sendirian Berhad, to establish a 51:49 joint venture
company (?JV?), in Negara Brunei Darussalam1. Swiber will own 51% of the JV with
Rahaman holding the remaining 49% stake. The formation of this JV is a direct push to
expand Swiber?s presence in the Brunei market.
Swiber was listed on the Main Board of SGX-ST on 8 November 2006. For its second
quarter (?2Q 2007?) ended 30 June 2007, Swiber reported an outstanding set of financial
performance. The underlying buoyant market conditions for the offshore oil and gas
industry sent Swiber?s 2Q 2007 net profits soaring 700% to a record US$6.3 million, on
the back of an impressive 232% growth in revenue for the same quarter to US$25.4
million.

The Group expects continued growth going forward, supported by an outstanding order
book, including letters of intent, of US$218.7 million as at 30 June 2007.


 


 

 

Forgot to post CIMB-GK research re fair value of Swiber.   According to research, it's definitely not S$4.18 (when will this TP be reached), based on secured biz, not assumptions which are a tad overprojected.   Sorry, can't access to report.  Would any CIMB-GK member pse post it?   

 

These said, I have to agree with what u guys said, hikitty, raymondyap, and musicwhiz


These analysts reports dont count much., in the end, Mr Market decides the price.


And long term investors shld be buying into weakness while short term sell into strength. :)


 

 

It's up to individual investors to believe DBS research's forecast of biz (though it appears  a tad too ambitious) for Swiber till 2008 and 2009 and the TP.   If I don't remember wrongly,  DBS Vickers (check me if I am wrong) stated many mths ago that the fair value for Labroymarine is $3.00, then $3.20.   It has not reached that target.  Those who have been "played out" by research houses will learn never to trust them.  Conversely, those who have benefited will "swear" by their reports.  E.g. OCBC and Fraser research houses stated early this year that Starcrus (SC) would test new highs, after SC's rally in January 07, but it did not materialise at all - those who believed them had been "played out" - Sigh!!!! They must have an axe to grind by their SC reports.

 

Swiber is stepping into a brighter future. There are no changes to our recurring earnings estimates in the FY07-09 forecast periods. Our fair value for Swiber stays at S$4.18, using 18x diluted recurring FY08 PER.

Maintain BUY recommendation : DBS Vickers Securities Research House- 21/9/2007

- Story: We recently spoke to management who reaffirmed that the first phase of the Shell Brunei contract is on target to be completed by end 2007. We see that the expected on-budget and on-schedule delivery of the first part of Shell Brunei contract to be the harbinger for more offshore EPCIC projects flow ahead.

- Point: We observe that Swiber has taken small but meaningful steps in recent weeks to strengthen the groupâ??s ability to take on more offshore EPCIC projects. This includes: 1) the strengthening of the management team with industry veterans, 2) the building up of financial resources, and 3) expanding the fleetâ??s capabilities. We expect Swiber to emerge from its consolidation mode in 2H 2007 as a stronger niche offshore EPCIC player for shallow water oil fields in Asia Pacific and the Middle East.

- Relevance: There are no changes to our recurring earnings estimates in the FY07-09 forecast periods. Our fair value for Swiber stays at S$4.18, using 18x diluted recurring FY08 PER. Maintain BUY.

(....bla bla bla...cut off)

 Section II: Bright earnings outlook

New orders in y-t-d 2007 are US$210.9m. Swiber has secured four contracts worth a combined US$210.9m in year-to-date 2007: 1) the US$146.6m Shell Brunei contract for transportation, replacement and installation of offshore facilities, including platforms, pipelines, and sub-sea cables, 2) the US$21.3m in Indonesia for installation of platforms and pipelines, 3) the US$31.0m project to provide offshore installation works in Malaysia, and 4) a US$12.0m project for offshore installation works in Malaysia.

Keeping our new order wins assumptions. We are retaining the new order wins assumptions in our earnings model, with US$275m worth of new contracts in FY07, US$303m in FY08 and US$333m in FY09. We have assumed Swiber to win another US$64m in the remaining months of 2007.

Tweaking our revenue estimate in FY07 slightly upwards. We have tweaked our revenue estimate in FY07 by 1.4% higher to US$176.5m. This is to account for the short delivery timeframes for both offshore installation projects in Malaysia, with completion dates within 2007. Indeed, these two contracts are to be delivered over a 1 to 3-month contractual periods, as compared to the more usual 6-12 month periods that were built into our earnings model.

Revenue visibility for Swiber is high. Our offshore EPCIC revenue projection in FY07 is now fully backed by orders on hand, as compared to 94% previously. This excludes any undisclosed additional works that may be added to the original contracted value during project execution. Our offshore EPCIC FY08 revenue projection is 30% backed by secured orders. Swiberâ??s order book now stands at US$230.

No change to earnings estimates. Swiberâ??s recurring net profit estimate is retained at US$35.4m, as we scaled down the contribution from associates due to the deployment of one anchor handling tug supply vessel (AHTS) in India in 2Q07, as compared to our expectation of two AHTS. We now expect the contribution from associates to be S$2.2m in FY07, compared to US$2.6m previously. The second AHTS owned by the 50/50 joint venture in India is now deployed to BG Exploration in 3Q07. Our revenue and recurring net profit estimates stay unchanged in the FY08-09 forecast periods.

Swiber is expected to continue focusing on executing the orders on hand. Swiber reaffirmed that the first phase of the Shell Brunei contract is on target to be completed by end 2007. A successful execution will strengthen Swiberâ??s resume as a niche offshore EPCIC provider for shallow water oil fields in Asia. Indeed, we see an expected on-budget and on-schedule delivery of the first part of Shell Brunei contract to be the harbinger for: 1) Shell Brunei to exercise its option for new projects in the 2009-10 periods, and 2) other oil majors to award contracts to Swiber in the region in recognition of its proven execution on big projects.

Offshore EPCIC projects are still in demand. Swiber guides that it is studying the possibility of bidding for >US$500m ballpark offshore EPCIC orders. With the improved financial and operational capabilities in 2H 2007, we believe that Swiber will be better able to capture market opportunities with lower execution risks. Our fair value for Swiber stays at S$4.18, using 18x diluted recurring FY08 PER.

Maintain BUY.

 

 

Hi musicwhiz,

I can understand your view that the market determines the value of a company, not the TP of  analysts. However, while some value investors like yourself calculate their own TP, a majority of investors or even traders buy/sell on official recommendations of these analysts (and other base on TA). Its a fact that you and I can't change.


On the other hand, it appears to me (at least) that some investors, such as yourself, are interested to buy more swiber but unable to as the price seems too high now.
My suggestion is that there other counters that are lower in price and has higher margin? No offence. :)


I myself had bought one coompany counter that I like alot, but it had moved too high to buy more. I can't do much either. sigh.... Treat it as a lesson lor.

Lastly, my view on Swiber is that it had moved pass the psycholical barrier or 3.24, which makes it hard to come down much. Moreover, for a counter that was pretty resilent during the correction, its popularity shld increase too.

Just my 2 cents :)

 

 

Stock price has been on the rise after the market correction in July/Aug and it has recovered very quickly thanks to the booming oil and gas industry.


However, the stock price is not that cheap either.....but personally i think the profit and earning visibility is good for oil and gas stock and wont be easily dragged down by sub prime etc.


My take is BUY and maintain some oil and gas stock in the overall portfolio.

 

Hi Guys,

Swiber is trading now at $3.26 around 12pm today from a low of around $2.30 during last months' crash (up 40%) . I think the current market condition is very volatile and driven by news from the USA and for SWIBER of course the oil prices.

Having said that, for short term investors, they should sell into strength but for long term investors, they should buy stocks with good fundamentals like SWIBER during weakness.

I follow Musicwhiz5's blog closely and I thank him for his neutral and sometimes insightful comments. I honestly must say it will take a lot of discipline to be like Musizwhiz5 but if I am not wrong he is more into value investing while most of us like me are more into cyclical trading where temptations are high to buy and sell frequently.

For now, I would sell 50% of my SWIBER holdings and keep 50% for more upside to come. Should the market correct again, I will buy back the 50% that I sold.

To each his own.

 

 

Hi solar2000,

I find your post very interesting indeed. Let me clarify by saying that Mr. Market determines the price he wishes to pay for a company, not the analysts. Thus, by merely stating a price which offers a margin of safety, it does not mean Mr. Market is willing to transact at that price. Sometimes, if the margin of safety is not reached, interested investors will be better off doing nothing at all. As a rule, I ignore analysts' target prices and prefer to focus more on the dynamics of the business at hand.

Another interesting observation: I have already bought yet I have not bought enough, so does this mean I will say good AND bad things about a counter ? If Mr. Market offers Swiber to me at a good price, I will gladly take it up. No use saying good things about a company when reality presents itself differently, otherwise it would be clear to all forum members that the person "promoting" a company (with his or her own hidden agenda) would turn out to be a hypocrite.

This post is also just a comment not intended to insult or offend; I also find it very amusing. :)

 

A few guys very funny here.

U are talking about a stock that was rated $4+ by Professional Analyst and was little affected during correction, yet u want or expect it go down to 2.5 or even 2 or 1.5.

There is a common saying:

Those who haven't bought enough would say bad things about a counter.

Those who already bought would say good things.


HaHaa . Not to offend anyone, just  find it so amusing.

 

Hi iTrader,

You can check out my blog at http://sgmusicwhiz.blogspot.com for updates on Swiber's operations and press releases cum announcements. I have not done a intrinsic value computation for quite a while as the newsflow has been rapid and each piece of news would alter the intrinsic value; thus it would not be practical to do a review every time the company announces a piece of news.

With the setting up of JV in Brunei and the order of 4 new vessels, I would estimate (note, this is just a personal opinion) that the intrinsic value would be worth somewhere in the region of S$2.50, as the positive developments have enhanced the company's edge in capturing more contracts. As there are no concrete LOI or contracts announced since July 2007, we have to assume the company is building its management team and setting the stage for more LOI later this year, thus this factor in itself should push the intrinsic value up from my previous estimate of about S$2.15.

If you desire a 40-50% margin of safety, then a good entry price would be in the region of S$1.25 to S$1.50.

Cheers....

 

Hi Musicwhiz5, could you share with us how did you derive the fair value to be in the range of $2 - $2.50?

thanks