Core earnings for FY14 could decline due to the lack of orders in 2013,
which, in addition with suppressed margin, brings Swiber back to
where it was post GFC. The c.US$100m net proceeds from the Kreuz
divestment will make hardly a dent in its high net gearing of 0.9x.
We downgrade the stock to
Underperform from outperform.
9M13 net profit was below our
expectations, at 64% of our FY13
forecast and consensus, mainly due to
lower margins and higher tax. We cut
FY13-15 EPS by 26-48% for lower
order wins. Our lower target price is
based on 0.6x FY14 P/BV, 1 s.d. below
its 3-year mean (previously 30%
below 5-year mean). Re-rating
catalysts include resumption of order
momentum and margin expansion.
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