Monday, September 17, 2007

Swiber – Review of recent news regarding their Brunei Operations

On September 13 and 14, 2007, Swiber made announcements regarding its Brunei operations. Firstly, they announced the appointment of Mr. Joseph Chen Hin Tin (“Joseph”) as the vice-president (“VP”) of Swiber’s Brunei operations. The following day, a separate announcement was made regarding the formation of a joint venture with Rahaman Sendirian Berhad (“Rahaman”), in which Swiber will have a 51% stake in.

The appointment of Mr. Joseph represents another step for Swiber in beefing up its Management team, and the 54-year old is a Bruneirian with experience as a Business Development Manager in a Brunei-based civil and mechanical construction company. His key focus is to leverage on Swiber’s Brunei presence to drive the Group’s business and to tune the Group’s focus on regional expansion, alliances and activities. I view this development as positive for the Group as Mr. Joseph has requisite experience working in Brunei (he is a local after all) and will thus be familiar with the culture, working style and prospects for the company. His experience as a business development manager is also very helpful as he will have the expertise and experience in building up Swiber’s business within Brunei. This continues Swiber’s focus on the recruitment of good, talented personnel in order to spearhead its rapid growth. Recall that they had, on July 12, appointed a new VP of Indian operations and on August 22, appointed a new VP of FSO operations. Thus, it would seem that there is one new key appointment every month.

The 51:49 joint venture with Rahaman serves to further cement Swiber’s presence in the oil rich country of Brunei, after their record contract win of US$146.6 million from Brunei Shell on February 13, 2007. Subsequent to that, on April 19, the Group set up a branch office in Brunei to explore more opportunities. With this new joint venture, Swiber is poised to further benefit from the demand for oil and gas as this JV allows them to bid for projects previously only allowed to local companies. Thus, it significantly expands their reach and increases the chances for them to land another contract in Brunei. Furthermore, the fact that Rahaman is chaired by Yang Mulia PG (the brother of the Crown Princess of Brunei) means that Swiber will have better connections within the country and will also cement their position as one of the leading players there.

So far, Swiber has been releasing a lot of news and updates on their operations at a rapid pace, with almost 3 to 4 announcements per month. While it is obvious that the company is growing very quickly, I also hope that they do not over-stretch themselves in terms of project management. Warren Buffett did mention that investments should be treated in the most business-like manner in order for them to do well. Thus, if I were running the company, I would also ensure my cash flow was sufficient for me to establish a strong position in existing markets first, before venturing out to other untapped markets. Swiber appears to be taking this route as well, as they have appointed VP in India and Brunei (existing markets).

I believe that once the Group manages to consolidate their position in these countries and secure more contracts, then they will start to venture out to other markets for more contracts. In this respect, I believe the Group is taking a more cautious stance in order not to spread itself too thin. I will be keeping track of the Group’s progress and also monitoring the upcoming second sale and leaseback transaction. Hopefully, they can follow up these business developments with more contract wins to boost their order book through FY 2008 as well.

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