Monday, June 1, 2009

Swiber - Sell by OCBC (01 Jun 09)

Raising S$73.9m through placement. Swiber Holdings Ltd (Swiber) announced that it plans to raise up to S$73.9m through a private placement by issuing up to 84m new ordinary shares at an issue price of S$0.88 per placement share. This issue price is at a 15.3% discount from the VWAP on 28 May 09 and a 7.7% discount to the VWAP over the last 10 market days before the placement agreement was signed. The proposed placement represents about 19.9% of the group's existing issued share capital.

Mainly for general working capital. The group intends to use the net proceeds of about S$71.8m (assuming placement shares fully subscribed) for general working capital purposes. This move will boost Swiber's cash position (US$35.8m as at 31 Mar 09) and also adds financial flexibility for the group, which is helpful in a time with relatively uncertain credit conditions. The group has short term debt of US$42.5m and long term debt of US$189.8m as of 31 Mar 09.

Optimistic about long-term fundamentals of the industry. The group operates 36 vessels as at 31 Mar 09 and plans to increase its fleet to 52 by 2010. Like Swiber, we remain optimistic about the long-term fundamentals of the oil and gas industry. Despite the recent economic downturn, population growth and GDP growth will remain as key drivers of energy demand in the long run. With few practical large-scale substitutes to oil, declining oil reserves and possibly a growing trend towards resource nationalism, we think the long-term prospects of oil and gas companies remain bright. The crux, therefore, lies in expanding fast enough to capture future business opportunities and at the same time ensuring cash flow is adequate to weather the current downturn, which can be a delicate balance.

Maintain SELL. Swiber's order book, though lower than the US$596m recorded as at 31 Dec 08, is still substantial (US$515m as at 31 Mar 09). New order flow has slowed and is expected to continue easing given the challenging conditions in the oil and gas industry, though the group is looking at opportunities especially in the Middle East. Despite the dilutive effect of the placement, our fair value eases just slightly from S$0.66 to S$0.62, as we have raised our valuation from 6x to 7x FY09F core EPS to reflect the lower risk aversion in the market. But as the current price is still above our fair value, we maintain our SELL rating.

No comments:

Related Posts Plugin for WordPress, Blogger...

My Blog List