Maintain Buy. A very strong set of 1Q13 results following a record year in FY12, which supports our upbeat view on Swiber. Tendering environment remains strong for offshore construction and contract wins plus execution is critical for Swiber in order to benefit from better utilisation of its vessels. This would support a positive re-rating for the stock and relieve balance sheet concerns. Maintain Buy with TP of SGD0.84, which is pegged to 8x FY13F PER.

1Q13 above expectations. 1Q13 revenue rose to USD310m (+59% YoY, +18% QoQ) with corresponding PATMI of USD20.1m (+132% YoY, +38% QoQ). Results were above expectations with PATMI making up 43% of our previous FY13F estimate. This is due to significant contributions from work done in Mexico and Myanmar, higher associate contributions and lower effective tax rate. However, the strong quarter should not be extrapolated to derive full year results due to the lumpiness in revenue recognition for Swiber’s business.

Main worry in order wins. Swiber has not announced any new contract wins since Feb 2013. YTD order win stands at USD153m with outstanding orderbook at USD1.1b. Our expectation is for USD1.2b in new contract wins this year. Contract wins can be lumpy and there is still time to play catch up, but this will be the focus for us to watch for from now. Our earnings forecast are at risk if contract wins falls short of our expectations. Swiber maintains that tendering is healthy and is bidding for close to USD2b worth of contracts, which includes 3 relatively large-sized contracts that could come to fruition this year.

Balance sheet strain to ease. Net gearing rose to 1.0x from 0.95x at end-FY12. Swiber recently drew down SGD160m from its MTN program through issuance of fixed rate notes at a relatively high cost of 7.125%. We expect balance sheet strain to ease as high capex needs for fleet expansion has almost come to an end.

Still below book. Stock is still trading below book (0.7x P/B), which we believe is mainly due to the weak balance sheet. Financials should improve if Swiber continues to secure contracts and execute. We raise FY13-15F earnings forecasts by 3-5%. Maintain Buy.

Source: Maybank Kim Eng Research - 16 May 2013