Towards Financial Freedom
SWIBER HOLDINGS - Gross margin hits multi-year low
Swiber's 2Q headline results came in strong with its PATMI soaring 103.9% YoY to US$15.1m on the back of 27.1% increasein revenue to US$229.6m. However, the bulk of the earnings is derived from one-off items such as forex and disposal of associate. Taking away those items, core PATMI arrived at US$4.7m (+44.4% YoY). Gross margin fell sharply by 5.6 ppts QoQ to hit a multi-year low of 14.2% as the group struggled to curb costs. Moving forward, though the group currently has won record amount of contracts this year with an outstanding order book of approximately US$1.6 billion, we remain doubtful over the group's abilities in generating profits. In view of the additional jobs, we increase our FY12 revenue and earnings forecasts by 8.3% and 11.7% respectively. Through the recent issuance of new multicurrency term notes, the group has resolved the near-term refinancing issues albeit at higher financing costs. Maintain NEUTRAL with an unchangedTP of S$0.66 base on 0.72x historical P/B.
Costs escalated along with revenue. As Swiber shifted its working field from India to Brunei and Indonesia in 2Q, we had cautioned investors over the group's abilities in curbing costs. Not only did gross margin fall sharply by 5.6 ppts QoQ to 14.2%, a multi-year low, admin expenses and financing costs also increased by 17.0% and 157.0% YoY respectively. Going forward, management also shared that for the recent US$830m Engineering, Procurement, Construction and Installation (EPCI) contract win, procurement element is heavy, which is expected to yield poorer profits, further weighing on the gross margin.
No more short-term refinancing concerns. The group has, for the past few months, successfully secured from banks a number of new multicurrency notes, bringing in US$320m at an average interest rate of approximately 6.2%. The fresh borrowings will come in handy to retire the two existing notes worth US$170m which will expire soon, and also to provide funding to buy back the convertible bond in case the bond holders exercise the put options, which management believe to be likely (valued at US$100.2m as of end June).
Source: OSK
Costs escalated along with revenue. As Swiber shifted its working field from India to Brunei and Indonesia in 2Q, we had cautioned investors over the group's abilities in curbing costs. Not only did gross margin fall sharply by 5.6 ppts QoQ to 14.2%, a multi-year low, admin expenses and financing costs also increased by 17.0% and 157.0% YoY respectively. Going forward, management also shared that for the recent US$830m Engineering, Procurement, Construction and Installation (EPCI) contract win, procurement element is heavy, which is expected to yield poorer profits, further weighing on the gross margin.
No more short-term refinancing concerns. The group has, for the past few months, successfully secured from banks a number of new multicurrency notes, bringing in US$320m at an average interest rate of approximately 6.2%. The fresh borrowings will come in handy to retire the two existing notes worth US$170m which will expire soon, and also to provide funding to buy back the convertible bond in case the bond holders exercise the put options, which management believe to be likely (valued at US$100.2m as of end June).
Source: OSK
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