Swiber Holdings: Concerns of financing and a declining orderbook still present

1Q09 results review. Swiber Holdings (Swiber)’s 1Q09 revenue grew 23% YoY to US$87.1m on the back of increased activities in the offshore construction projects in Malaysia, Brunei, Indonesia and India, but declined 15% QoQ. This flowed down to net profit of US$11.9m, which saw an increase of 15% YoY (and a turn-around from 4Q08). Adjusting for gain on disposal of assets of US$3.5m, core operating profit was US$11.6 (above our estimates of US$9m). Operating profit margin of 13.3% was a reversal from 4Q08’s margin of -16.7%, but a decline of 5ppt on a YoY comparison. This was also better than our expectation of 9%.

Nonetheless, financing is still our key concern. Swiber’s net debt to equity ratio stood at 0.94x as at 31 Mar 09 due to debt repayments and sale-and-leaseback arrangements. Going forward, financing is still our key concern. We note that the repayment of Swiber’s non-current bonds would be due in 3Q10 (US$71.2m) and due in 1Q11 (US$72m).

Declining orderbook is another worry. Swiber has an orderbook of US$515m as at 31 Mar 09 as compared to US$596m as at 31 Dec 08.

Target price under review. Maintain SELL. Over the past month, Swiber’s share price (+76%) has outperformed the STI (+12%) and its peers (+53%). We are currently evaluating our estimates, pending a talk with the management. Our target price is currently under review. We continue to be cautious on this counter, especially on financing concerns and weakness in earnings quality. Maintain SELL.

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