Monday, March 17, 2008

Swiber - Revised Order Book with Major Project Win in Thailand

Swiber today announced a major project win in Thailand. They have been awarded a conditional letter of intent (LOI) from CUEL Limited ("CUEL") for installation of platforms and pipelines in the Gulf of Thailand. The value of these services is estimated to be in the region of about US$50 million per year, and this will carry on for 5 years from FY 2009 till FY 2013.

The full announcement can be read from Swiber's press release, so I won't embellish with more details here. What's important about this contract is that it represents (thus far) the longest contract which Swiber has signed to date, for recurring revenue. Previous contracts had been signed previously with BG Exploration (back in Dec 2006 and Jan 2007) for 3-year charter contracts worth a total value of US$14 million, but this is a far cry from the most recent contract which has a combined total value of US$250 million (US$50 million x 5 years) and extends for 5 years. Apparently, the benefits of an enlarged fleet means that Swiber will be able to handle more contracts of higher value at the same time, without needing to charter vessels from third parties. This should increase the breadth and scope of the contracts won and gear the company for even higher-value contracts come FY 2009 and beyond.

Below is an updated order book table, after incorporating Aspellian's comments about including 2 contracts from Dec 2006 and Jan 2007 from BG Exploration, as well as the new Thai project:-

I will proceed to review Pacific Andes' 3Q FY 2008 results next, and also to comment on FSL Trust's Annual Report should I find anything interesting to speak up about.


Anonymous said...

Even though Swiber's current/forward PE of 13-14 (at price of $2.3) is high compared to the many china stocks with PE<5; but we have to take note that Swiber's revenue is quite certain will double this year; hopefully profits too. I only have one other stock that has such prospect. I will speculate that in a "bull run", swiber's announcement may make the price shoot up to above S$4/- compared to the current price. Which is fine for value investors who buy companies because of exciting business prospects while letting others worry about the financials in US economy. Cheers.

Buying opportunity of a life time (so far for me!)

Musicwhiz said...

Hi Aspellian,

Historical PER is somewhat high yes, but usually the market looks towards forward PER instead. However, note that in bear markets companies can trade at 2-3x PER and most will also trade below NAV. Thus, it should be expected that Swiber will trade at a significant discount to its potential intrinsic value.

As I mentioned, as long as the company is doing fine, we can ignore the market's noise.


Anonymous said...

Hi Musicwhiz,

Today I failed to vest in Cosco with a bid of $3. The counter closed at $3.02.

I am considering Swiber which closed at $2.52. What is the margin of safety for this counter?

In terms of potential growth, it is higher than Ezra? Although Ezra is cheaper at $2.18, is Swiber a better buy considering all the financial stock data?

For your comment, please.

Thank you.


Musicwhiz said...


I think for Swiber, you should consider buying below S$2.00 for adequate margin of safety. But this is just a personal opinion, a lot still depends on whether the company's growth is on track.

When comparing 2 companies, one cannot look at absolute share price to determine "cheap". One must look at valuations. I would comment that Ezra and Swiber are still growing, though Ezra is more in a mature phase while Swiber is still growing rapidly. As to when growth will start to taper off, I would hazard a guess at FY 2011 for Ezra and FY 2012 for Swiber, unless other news and facts come into play.