Record revenue and net profits, reiterate Buy. Swiber delivered a record set of results with FY12 revenue and PATMI coming in at USD952.2m (+45% YoY) and USD45.7m (+42% YoY) respectively. Revenue was in line with our expectations but bottomline figures beat ours and consensus’ expectations mainly due to higher-than-expected margins. Adj. EBITDA margin for FY12 was higher at 16.2% compared to 15.5% a year ago. We reiterate our Buy call with TP unchanged at SGD0.82.

Secured USD153m in new contracts. The company also announced new contract wins from oil majors, involving transportation and installation of pipelines and offshore structures in Southeast Asia region. This brings orderbook level to USD1.35b of which at least half would be executed in FY13F. We believe that the successful execution of India’s first floatover operation recently demonstrated Swiber’s capability and cemented a stronger relationship with ONGC. This paved the way for potentially more contract wins from the latter.

Strong contracting environment. Swiber’s current tender book stands at about USD3b, which includes several large-size projects which it intends to bid for, and these are expected to be awarded in 2Q13-3Q13 if they are successful. Management suggested that FY13F could be another bumper year for contract wins. Our order expectation is for USD1.2b in new contracts for FY13F.

Better prices for contractors. Swiber further added that with abundant jobs available, contract prices seem to be moving in favour of contractors, with increasingly more deals being conducted on a negotiated basis rather than through tendering. This could mean higher prices and better margins for the industry.

Margin upside opportunities. We believe that Swiber could see further upsides in margins from better fleet utilisation and when it reverses some of its sale-and-leaseback arrangements, but bearing in mind that this would lead to higher gearing. Margin improvements and contract wins should be key catalysts to drive share price re-rating. Reiterate Buy, TP of SGD0.82, pegged to 8x FY13F PER.

Source: Maybank Kim Eng Research - 28 Feb 2013