Decreasing order book. The group's order book is now US$515m as at 31 Mar 09 compared to US$596m as at 31 Dec 08. Slower order flow should hardly be surprising, given lower oil prices and the global economic downturn. We note that so far about US$70m worth of contracts were secured in 1Q09 compared to about US$470m (including the US$250m CUEL contract) in 1Q08. Management, however, is optimistic about obtaining contracts from Saudi Aramco's US$60b investments in oil and gas production over the next five years, especially after forming a joint venture with a leading Saudi Arabian company, Rawabi Holding Co Ltd, which could increase the chances of securing contracts.
Little room for error. The group's net debt-to-equity ratio has eased from 1x as at 31 Dec 08 to 0.94x as at 31 Mar 09. It is imperative that deliveries of vessels under the sales and leaseback agreement are on time so as not to impact its cashflow (out of 15 sale and leaseback deals totaling US$408m, eight have been delivered). Management does not anticipate any more delays in vessel deliveries from reports of project management teams stationed at yards. The group mentioned that the delivery schedule is still in line so far.
Maintain SELL. We are keeping our FY09 estimates but lowering FY10 estimates by 13% with lower contract flow assumptions. However, we are raising our fair value estimate to S$0.66 based on 6x FY09F core earnings (peers trading around 7x) with lower risk aversion in the market and a re-rating of the sector. At current price, the market appears to have run ahead of Swiber's fundamentals and it is prudent to note a few things 1) slowdown in orders, 2) relatively high leverage, and 3) little leeway for hiccups in project execution. We maintain our SELL rating on the stock.
Click here for more Offshore Marine Stocks Technical Analysis
Sponsored Links
Comments
No response to “Swiber Holdings: Slower contract flows”
Post Comments (Atom)
Post a Comment |
Post a Comment