Review on 2Q08
Swiber has produce an impressive 2Q08 gain in revenue and profit yoy at 398.1% and 251.1% respectively. To be honest I was expecting profit to be around the 200-215% and I’m pleasantly surprised with this quarter’s result. Growth in Revenue is a result of their increasing fleet number leading to completion of more operations/contracts. In line with their expansion, both Administrative expense and Finance cost have both gone up. This can be attributed to their increasing staff and admin cost.
Looking at their Balance Sheet, it seems like they have used up most of their funds from their bond issue, leading to a drop in Cash and bank balances. Receivables have increased by about 45% from the previous quarter showing that their on-going operations will continue to rake in revenue. With a new bank borrowing of 56 mil, their current debt to equity ratio is almost at 50-50 (I only look at their long term debt, mainly bonds + bank loans). These are perhaps the numbers that make me feel uneasy. I’m fine with unsecured debt (bonds) as they have no collateral attached to them. Bank borrowings however are secured debt with collaterals attached to them and in this case, their vessels and assets. Amount of secured debt payable within and after this year is totaled at 86,404 mil. While I am confident they will be able to meet the deadlines for the repayment, we would have to take a closer look at their ability to repay loans should they incur more debt.
Their cash flow statement shows an 18 mil increase in cash generated from operating activities. This is good news as compared to last quarter, when they were nursing a negative cash flow from operating activities. Although this shows improvement in their capability to maintain a positive cashflow, I will wait for consistent improvements in their 3Q results before making any judgments.
Summary
Swiber is in a midst of rapid growth and therefore require taking up debt for financing, however this debt must be closely watched. I will be looking forward to seeing Swiber garner bigger and juicier contracts to add on to their order book of US$664 mil. With earnings for 2Q08 at US$124.526 mil, EPS is at US$0.293 = SGD$0.411. Taking today’s market price into consideration, P/E is at 4.38. Looks pretty good to me for a rapidly growing company.
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2 comments:
Hi Kenny,
I have also done an analysis of Swiber on my blog at http://sgmusicwhiz.blogspot.com.
Keep up the great work and it's good to know another value investor ! (Wish there were more of us around !)
Cheers,
Musicwhiz
Hi, interesting;) the whole oil and gas sector seems to be laggin the offshore and marine segment despite being intricately linked. I do believe that it is time for a re-rating too, but throw more caution to the winds as too high oil prices may not fuel demand for this service but might instead lead to demand destruction. For now, I feel I am not competent enough to evaluate if this company is doing well due to the booming sector, or because of the demand for their operations in particular. Shall steer clear of it now;) Wish u the best of luck in ur investing.
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