Friday, July 13, 2007

Swiber - Incorporation of Subsidiary Company in India and Appointment of VP

Swiber announced today that they have incorporated a 100%-owned subsidiary in India called Swiber Offshore (India) Private Limited. This company comprises 10,000 shares of Rp 10/- each and its principle activity will be to carry out business in India and the Middle East relating to EPCIC activities. The investment in this wholly-owned subsidiary was funded through internal resources and is thus not expected to have a material impact on NTA per share or EPS for the current financial year.

I perceive this move as a sort of springboard move by the company to tap the opportunities present in India and the Middle East. In FY 2006, Swiber had already inked some deals with BG Exploration in India; thus the incorporation of this company can only mean that Swiber is intending to further extend their presence in this key market in order to capitalize on possible opportunities.

At the same time, Swiber has also announced the appointment of Mr. Nijan Kumar Mahapatra (BK) as vice-president of the Group's Middle Eastern and Indian operations. Mr. BK brings with him 24 years of experience in the oil and gas, petrochemical, marine and civil engineering industries (he has a bachelor's degree in civil engineering from Kashmir). Prior to joining Swiber, he was the regional manager of another EPCIC player (the press release did not name his previous employer, though) and has a good track record to speak of in terms of delivering results. This factor, coupled with the new branch office in Mumbai, will help to sprearhead the Group's expansion into India and the Middle East with their unique offering of EPCIC services.

A quick comment on this: I had spoken to Mr. Raymond Goh at the AGM some time back and he did mention that he believes in hiring a strong Management team with good capabilities in order to help him achieve his vision for the company. In particular, he spoke of hiring a team which comprised various specialties from various countries, in order to get a combined pool of experience such that everyone can share ideas and build upon their knowledge base to help grow the company. Mr. BK is the recent addition and his track record shows that Mr. Goh is still committed to adding strong, capable people to his Management team. Often, as I have mentioned in my previous post, a strong management team is what is required to propel the company to greater heights. Time will tell if Swiber can indeed secure larger contracts in India and Middle East, but at least they are already laying the foundation in anticipation for such growth.

EGM held on July 31, 2007 2:30 p.m. at Raffles City Convention Centre

Swiber is holding an EGM at the above date, time and location to approve resolutions relating to the sale and leaseback of 5 vessels as announced on March 28, 2007 and May 10, 2007. A circular should be despatched soon to shareholders regarding the transactions and their financial effects. Ezra has sent me a similar circular before on this sale and leaseback arrangement and typically it tells the shareholder what the consideration is (cash portion), the profit to be recognized (exceptional gain) and the operating lease associated with the leasing of the vessels back to Swiber. What I am curious about though, are the bargain purchase options (BPO) specified in the Agreement(s) and how much Swiber will need to incur to re-purchase the vessels back. Swissco's strategy is markedly different in that they choose to own all their vessels instead of lightening their Balance Sheet using this arrangement. As to the merits and demerits of such an arrangement, more details will be discussed once I receive the circular from Swiber.

Ezra - Appointment of Mr. Tay Ching Kwang as the Group's 1st Finance Director

A separate announcement from Ezra today also mentioned the appointment of the Group's first Finance Director, Mr. Tay Ching Kwang (what a coincidence with Swiber eh ?). Incidentally, Mr. Tay used to be the chief financial officer of (now called Global Voice after an RTO !) from Feb 1999 to May 2001; and has also held a position as financial accountant in a listed company called Flextech Holdings Limited back in 1994-1996. Accordingly, he brings with him about 17 years of experience in handling M&As, Pre-IPOs and corporate finance matters.

I suspect the Group is gearing up for a possible M&A deal by hiring Mr. Tay, as the CEO has mentioned expanding into markets in which Ezra does not have a presence currently. After buying into 22% of Nylect (a separate post will be done in future on Nylect) and listing EOC Limited in Oslo, Norway, I believe Management should now be seeking opportunities to broaden their customer base. Ezra had already catapulted themselves into the global league of FPSO players in Oct 2006 by clinching their first milestone FPSO contract, and are now pitting themselves against giants such as Solstad, Prosafe and Tidewater. The Group is probably contemplating possible strategies to enhance their competitive edge and to establish a stronger presence in key markets where there is buoyant demand for oil and gas exploration activities.

The next 18-24 months should be an exciting time as I observe how the company intends to execute its growth strategy. There might be hiccups and obstacles along the way but hopefully, the Management is able to learn from them and emerge stronger. I remain optimistic about the Group's prospects as we enter the last 2 months of FY 2007 for Ezra.

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