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Thursday, August 15, 2013

Swiber Holdings - Order Intake Needs to Catch Up


Within expectations, maintain Buy. 2Q13 results were generally in line with our expectations but looks to be a tad lower than consensus. Revenue for the quarter came in at USD242m (+5% YoY, -22% QoQ) with net profit of USD4.2m (-72% YoY, -79% QoQ). 1H13 net profit made up 47% of our previous FY13F forecast. Results were weaker sequentially but should not be a cause for alarm due to the lumpy nature of its project-based business. We believe that 2H13 would be slightly better than 1H13 and a 20%/22% EPS growth in FY14F/15F is achievable. We maintain our Buy call with TP raised slightly to SGD0.88 as we roll forward our valuations to FY14F earnings, pegged to 7x PER (previously 8x), in line with smaller cap peers.

Lumpiness not unusual, margins held steady. Less work was done in India in 2Q13 as compared to 1Q13, but was partially compensated by more work in Brunei, Indonesia, Indonesia and Myanmar. The lumpiness from the project-based nature of its business should not be a surprise. More importantly, margins held steady sequentially with 2Q13 gross margin of 15.3% (1Q13:16.1%) and EBITDA margins of 14.6% (1Q13:14.3%).

Strong tender books to support order intake. Order win momentum has been slow with YTD contract win of USD570m and current net orderbook stands at USD1.2b. Our initial assumption was for USD1.2b in new order wins this year. Swiber is confident that order intake should accelerate towards the end of the year as its current tender book stands at about USD2.3b in which several large contracts could potentially be awarded by year end. We exercise more conservatism by reducing our FY13F order win forecast to USD1.0b. Our FY13-15F net profit forecasts are consequently lower by 3-6%.

Valuations still attractive, maintain Buy. We believe that valuations are still attractive with the stock trading at 6.8x/5.6 FY13F/14F PERs and 0.7x P/B. High gearing (0.92x) would be the main concern but this should be manageable as long Swiber continues to secure contracts and execute at current levels. We roll forward our valuations to FY14F earnings but pegged to a lower PER of 7x, in line with smaller caps O&M peers. Maintain Buy, TP SGD0.88.

Source: Maybank Kim Eng Research - 15 Aug 2013

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