Swiber may be in a net cash position by end 2009. The net cash proceeds from new share placement would greatly improve Swiber's balance sheet, vs. 0.94x net debt as of end 1Q09. As Swiber takes delivery of vessels under sales-and-leaseback agreements, we expect the group to be in a net cash position by end 2009.
Two critical months for new orders. Swiber's order win season is now reliant on the award of contracts for relatively new markets in South Asia/Middle East, especially in June/July. The international/national oil companies have been asking for 20-40% dip in supply chain cost, which to-date, has not happened. While higher oil prices are of help, the new orders flow would still be uncertain, given the still high offshore EPCIC costs and unfavorable credit terms. Note that Swiber's net order book as of end 1Q09 was US$515m, while its order pipeline is unchanged q-o-q at about S$5b.
Maintain SELL. Our lowered fair value for Swiber is S$0.60, due to negative share dilution impact, and using 7x FY09 PE. Maintain SELL, due to low earnings visibility.
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