Swiber   

at what price to buy?

Why such a steep fall? Anybody any news? I can't find any.

Thanks in advance.

 

Report on Swiber by CIMB.

Earnings unchanged but target price reduced $5.05 to $4.90, still based on 15x CY09 EPS. Our earnings estimates remain intact but have excluded the potential upside from drilling division. The drilling unit should give upside to our FY10 earnings forecasts and beyond, if executed. Our target price is however, reduced on lower US$/S$ exchange rate.

Swiber is trading at undemanding valuation of 8x CY09 core EPS against a 3-year CAGR of 59% through to CY10. We see the recent pull back in share price as good opportunity for accumulation. Contract wins and successful project executions as key catalysts for the stock. Maintain Outperform.Offshore construction enquiries remain high in the region due to tightness of construction vessels. Swiber’s order book as at end- 1Q08 was at US$476m with YTD order win of US$248m (excluding LOI fro CUEL worth US$50m for 5 years or possibly US$250m in total). We believe 2008 order book could exceed US$1bn if Swiber clinches a 3-year contract for ED.

 

Deepwater fields represent the last frontier in the offshore marine industry, and Swiber is manoeuvring itself into position by getting its deepwater rig ready for operation in 2010. While having the foresight to focus on the deepwater sector, Swiber executive chairman and group CEO Raymond Goh believes his company enjoys a competitive edge because it is designing a rig to fill a market niche. Its Equatorial Driller is designed to operate in the deep but relatively calm waters of South-east Asia and West Africa. Specifically, in these places sea conditions are benign with head seas of 3.8m, water depth less than 8,000 feet and drilling depth less than 20,000 feet. The new deepwater rigs coming onstream are typically over-specified and over-sized for such an environment and come with a high building cost of over US$700 m. 'The hull is a unique design concept which will cost 50 per cent less than comparable semisubs at the moment,' said Swiber Offshore Drilling CEO Glenn Olivera. Other advantages of the rig will be its faster and simpler build time due to the simple design.

This enables Swiber to offer very competitive day rates for chartering the rig, said Mr Goh. Mr Olivera, however, stresses the rates offered will be competitive and that they won't be undercutting the market. Another benefit to clients is the rig uses an anchor-mooring system to hold it in place as opposed to the popular dynamic positioning (DP) system currently in use. DP systems make use of motorised thrusters to hold the rig in position and this can add up to US$50,000 a day in running costs to the operator in today's high oil price environment. 'Visibility is strong till 2012, and beyond that we remain very bullish on the deepwater drilling sector due to the combination of positive market forces in the rig supply market, continuing high oil prices and the decline of oil reserves,' said Mr Olivera.

 

At this moment, I opine that be less optimistic, due to market loh.

 

Swiber is an offshore marine support company. The company's services include engineering, procurement, and construction.

CIMB's immediate outlook is an upside target of $2.88.

 

Swiber buys out North Shipyard
SINGAPORE 06 August ? Swiber Holdings, service provider for the offshore oil and gas industry, has acquired North Shipyard in Singapore for S$10.3M ($6.7M). Facilities at the shipyard, which has a water frontage of 124m, include a slipway, wharf and working yard. Swiber, which was listed in the Singapore Exchange last November, also inherits a management team and workforce of 90. The yard will support restoration and modernisation work for Swiber's expanding fleet of marine support and construction vessels and will also be used for conversion and construction of vessels. Swiber operates a fleet of 20 tugs and barges with 12 more vessels under construction and has plans to develop in-house technical design capabilities at the yard. ?Having control of our own marine base ensures our vessels against any possible downtime while improving logistical efficiency,? explained Swiber executive chairman and chief executive Raymond Goh. The purchase has been made in cash through the company's internal resources. The company has set up a S$300M multicurrency medium term note (MTN) programme and last month opened a subsidiary in Mumbai.
Lloyd's Register - Fairplay web links

 

Raymondyap,

Perhaps I should clarify my stand since it has caused some confusion. My assessed fair value of S$2.00 is an indication to those who wish to get vested to be careful of the current market price as it offers little if no margin of safety based on the fundamentals of the company at this point in time. Valuations change daily and the business changes daily as well, thus this intrinsic value may also change with time. For people who are already vested (i.e. myself) and are confident of the many factors driving the company's growth, I would recommend a HOLD. Unless prices get so incredibly over-valued (i.e. S$5 for example), then I would see the need to sell. With current valuations, and assuming Swiber is able to be successful in executing its strategy, I feel that in time, valuations should catch up with price.

Warren Buffett once commented that if you find a great company with a durable competitive advantage, why go around selling it at all ? To be frank, if I had done that with some of my other investments, I would have missed out on good gains as the businesses I own have grown over the months/years, yielding me even better returns.

Hope this explains my stand, and I apologize for any misunderstanding.

 

hi all, pls tell me what price is good price for me to buy in..? I got 2 frien from ST and venture said wait for next week , is it true..?

 

musicwhiz,

What I meant was this: I made a mistake in selling at $2.74 and so I bought it back at $2.79. So, it is as good as I did not sell at all and my initial investment price is still intact at $1.15 (ok, deduct away the $0.05 price difference + broker commission etc.. which is not substantial in this case). Hence I still have my margin of safety. Anyway is just a technical definition.....

However I do not quite understand your position : On one hand, you view $2.79 as risky and $2.00 as a fair- value BUT on the other hand you are not selling your stakes at $2.79 which is way above your fair-value estimate. Does it mean you hold on to your stocks even if they have way surpassed your fair-value estimates. Do you wait for the company earnings to catch up with the share price? It may or may not catch up........

I do not have any financial background,  but I am making a logical argument and most of my buys are my own judgement calls based on analsyt reports.

 

 

musicwhiz5: when ppl say make monies from stock is easy may actually be referring to contra and shorting which bring in great profits within a single day. of cuz they neber realize great profits come with great losses too :)

 

Hi raymondyap,

Thanks for your comments on my blog, I appreciate it. When I meant margin of safety I meant for your current purchase, because every time we sell and buy back at a higher price we are actually increasing our risk, though some may argue that you have already taken profit. The problem is that if anything should happen to the company (touch wood !), then you should ensure you are adequately protected against capital loss. That's why I adhere to Benjamin Graham's margin of safety concept.

As to when to "let go" of a company, I believe it is when you assess the growth of the company as being either stagnant, or less than the rate of inflation. If this is the case, you can either choose to keep the shares for dividend yield or to dispose of them for a capital gain. It's not an exact science and your reason for purchasing should be reviewed every few months to ensure things are going well.

This is why it is so difficult and time-consuming to invest properly. Most people think making money from the market is so easy, but they don't see the hard work behind the scenes (analyzing, collating information and interpreting it).

 

Hi Musicwhiz,

First of all thanks for your reply and I really like your blog- I find it very objective and insightful.

About Swiber, I actually bought the stock at $1.15 a few months ago , sold half of it sometime back and and now I sold the other half at $2.74 last week but with a tinge of regret (because I am supposed to hold it for the long term). So, that is why I bought it back at $2.79.

I guess, you may agree I do have some margin of safety taking into consideration my initial purchase price was $1.15.

By the way, how long is long term and when can one say the stock has reached its potential price target? I find it personaly very hard to find an exit point for stocks. How to decide whether to take profits and run OR let the profits run for you...

cheers....

 

 

Hi raymondyap, Just a word of caution: I did say that it is good not to speculate but you should also buy into a company with an adequate margin of safety. In this case, S$2.79 does not offer much margin of safety based on current valuations (unless some other newsflow changes the intrinsic value of Swiber). I would say about S$1.60 gives a decent 20% margin of safety from a fair value of S$2.00 which I have computed based on optimistic forecasts and after taking into the dilutive effects of the placement.

Good luck !

 

what happened to Swiber? How comes its going south?

 

Even after reading Musicwhiz's blog, I couldn't help it but sold at 2.74 only to see it climb to an intra-day high of 2.96.

So, today I bought back at 2.79 and will see if I have the resolve to hold it for the long term (6 to 12 months) in-line wth Musicwhiz's philosophy of not speculating.

 

Thanks Musicwhiz for your advise....Think will have to give up hope on climbing after 2.67......

 

Hi leying,

If you've read the posting on my blog you will know that I don't give target prices for companies, only brokerages do that. All I do is to compute an intrinsic value for the company based on available information and my own analysis. Intrinsic value can be subjective but it gives an indication of the approximate fair value of a company so that you may enter at a price which affords a decent margin of safety. At S$2.67, I don't see much margin of safety unless the company declares more contracts. Just a personal view, I will be blogging more on Swiber in future if they should announce other news.

 

Musicwhiz5, can advise what's the target price for Swiber? Can enter now at 2.67?

 

Swiber is still going strong despite the share placement diluting EPS. I have sold and bought back to keep for long term growth. I think target price of  $3.00 should be reached within 6 months if they continue to get new contracts

 

INTERVIEW - Singapore's Swiber on course for robust growth, eyes Mideast market      6/25/2007 10:01:00 AM

SINGAPORE (XFN-ASIA) - Swiber Holdings Ltd believes it is on course for robust growth as it wraps up details on its Middle East joint venture and grows its fleet of vessels to support its offshore engineering, procurement, construction, installation and commission (EPCIC) services amid a buoyant oil and gas industry. The firm, which provides EPCIC services to the oil and gas industry, recently signed a memorandum of understanding with Emirates Investments Group LLC to establish a 50-50 joint venture to explore EPCIC opportunities in the Gulf region, the Middle East and Pakistan. Swiber chief executive officer Raymond Goh said the joint venture will participate aggressively in the third and fourth quarter in the submission of bids in the Middle East. He said he expects the joint venture to be earnings accretive from next year. So far this year, Swiber has secured more than 200 mln usd worth of contracts in Southeast Asia, including a 31 mln usd contract for offshore installation works on an oil production platform at the Puteri Wellhead in Malaysia. Goh remains bullish about what's ahead for the company, citing the huge demand for oil, and with about 40 pct of the world's crude oil production coming from the Asia Pacific and the Middle East. DBS Vickers Securities expects the firm to report a three-year recurring net profit compounded annual growth rate (CAGR) of 87 pct from 2007-2009. In 2006, Swiber's net profit almost doubled to 12.1 mln usd from 6.2 mln in 2005. Goh said the DBS Vickers estimates look achievable barring any unforeseen circumstances. "Theoretically, it is achievable because the amount of work available in the market can justify such growth. And of course, as a company we will work hard towards achieving more jobs," he said. "We will focus on markets where we have strongholds like Brunei, Indonesia and Malaysia. And we are also actively looking for projects in Vietnam and Thailand," he added. Swiber has also been expanding its fleet of vessels to support the expected growth of its business. The firm's fleet currently includes 15 vessels comprising seven tugboats, six barges, one crane barge and one jack-up barge. Swiber has ordered additional vessels -- including five anchor handling tug supply (AHTS) vessels and a pipelaying barge -- that will be delivered by the end of the year. For the next two years, Goh said the company intends to buy an additional pipelaying barge, one crane barge, one accommodation barge, and four more AHTS vessels. Goh said the firm will consider going to the market to raise funds for its expansion plans. "We are in a growth mode now and the management will look into options which are feasible and attractive for the company to raise funds, one of which is an equity placement exercise that we will consider when the right time comes," he said. (1 usd = 1.53 sgd) yuinmunn.szetoh@thomson.com MMMM