Swiber – Laggard in the oil and gas play

The Edge, in issue (17 – 23 Sep 2012) had outlined charts for some oil and gas stocks such as Ezion[1],
Kreuz, Ezra, Nam Cheong[2] etc. I would like to bring readers’ attention to Swiber whose chart looks
interesting. Based on Chart 1 below, Swiber’s chart is forming higher highs and higher lows. It seems to be consolidating around the region of $0.640-0.655 at the moment. Open balance volume or OBV which incorporates volume to price changes (to detect momentum) is almost near an all time high. ADX is at 43 with DI positively placed (i.e indicating the presence of a trend). Supports are at $0.625 / $0.635 / $0.645 and resistances are at $0.675 & 0.695. A more significant resistance lies around $0.705-0.715.

Chart 1: Swiber’s price chart
Source: Metastock (25 Sep 12)
Laggard among oil and gas stocks
Based on Chart 1 above and Table 1 below, it is true that Swiber has risen a whopping 25% from $0.515 on 4 Jun to $0.645 on 25 Sep. However, this pales in comparison to its other peers. For example, Ezion and Kreuz have rallied 82% and 33% respectively since 4 Jun 12. It is also noteworthy that Swiber announced significant contracts during this period which may have contributed to its rally to a certain extent. (i.e without the contract wins, Swiber’s share price may have climbed to a lesser extent).
 
Table 1: Swiber’s share price performance vis-à-vis peers
Stocks
4-Jun
25-Sep
chg since
4 Jun
ASL
Marine
0.590
0.670
14%
Ezion
0.710
1.290
82%
Ezra
0.900
1.195
33%
Kreuz
0.265
0.375
42%
Nam Cheong
0.162
0.210
30%
Swiber
0.515
0.645
25%
STI
2698.90
3067.1
14%
Source: Ernest’s compilations
Record order books of US$1.6b underpins earnings
As at Aug 2012, Swiber has about US$1.6b of orders with an estimated US$1.0b from new contract wins awarded year to date. According to Table 2 below, Capex and Operating expenditure (“Opex”) are expected to reach a record US$728b and US$500b respectively in 2012. This would further rise to US$963b and US$671b respectively in 2016. Among the regions, Asia Pacific and Middle East are key growth regions with a compound annual growth rate of 7.9% and 8.4% respectively between 2012 to 2016. Swiber has presence in both of these regions.
Table 2: Global offshore sector spending
 Source: IHS Upstream Spending Report (April 30, 2012)
Kreuz rise does benefit Swiber
Based on Swiber’s 2011 annual report, Swiber owns 63.2% of Kreuz. As of 25 Sep, after Kreuz’s meteoric 42% rise in three months, Kreuz’s market capitalization is around $209m. Swiber’s market capitalization is around $393m, of which one third is attributable to Kreuz. In other words, Swiber’s business (ex Kreuz) is only worth approximately S$261m.
Some noteworthy points though…
Redemptions  of notes and bonds
With reference to its 1HFY12 results, it is noteworthy that Swiber faces the redemptions of their multicurrency medium term notes series 7 & 10, amounting to US$170m in 2HFY12. In addition, Swiber’s US$100m convertible bond notes may be redeemed in Oct 2012. As a result, Swiber has been exploring various funding options. On 25 Sep, Swiber has issued S$80m, 9.75% senior perpetual securities which may be used for the redemptions. Going forward, it is like that they may face higher interest expenses.
Laggard = does not mean it will rise soon or definitely rise
Being a laggard does not mean that it will definitely rise, or rise soon. Furthermore, there may be reasons why the stock is unloved by the market.
Support at $0.620-0.625 crucial – rising trend line
The support at $0.620-0.625, as represented by the rising trend line is important. If Swiber breaks below the rising trend line with volume expansion, it does not bode well for the stock.
Valuations not excessive against peers
With reference to Table 3 below, Swiber’s valuations do not seem excessive. Based on its latest 2QFY12 results, Swiber’s NAV / share is around $0.880 and it trades at around 0.7x P/BV. ROE pales in comparison with that of Ezion but if the company can continue to execute on their contracts while keeping costs in check, it is likely that ROE may be able to improve in the quarters ahead.
Table 3: Comparison of Swiber vs its peers
Short
Name
Cur
Last Px
Analyst TP
Change in TP
1 Yr high
1 Yr low
Adj Mkt Cap (S$m)
Est PE
ROE (%)
Est P/Bv
Est Div Yield
Swiber
Holdings
SGD
0.645
0.766
18.8
0.785
0.465
393.1
7.2
9.4
0.7
0.0
Kreuz
Holdings
SGD
0.375
0.440
17.3
0.415
0.245
208.9
4.9
27.2
1.1
NA
Ezion
Holdings L
SGD
1.290
1.598
23.9
1.300
0.370
1,098.4
13.3
24.2
2.2
0.2
Ezra
Holdings Lt
SGD
1.195
1.423
19.1
1.335
0.750
1,168.6
14.1
5.6
0.9
0.2
Asl
Marine Hldgs
SGD
0.670
0.756
12.8
0.685
0.420
282.8
6.4
9.4
0.7
3.3
Ch
Offshore Ltd
SGD
0.48
0.440
-8.3
0.505
0.340
338.4
10.0
13.5
1.1
5.6
Mermaid
Maritime
SGD
0.325
0.310
-4.6
0.370
0.220
255.0
NA
-1.3
0.5
NA
Average
ex Swiber
9.8
13.1
1.1
2.3
Source: Bloomberg (25 Sep 12)
P.S: This is just an introduction on Swiber. Readers who are interested in Swiber can email me at crclk@yahoo.com.sg for the above writeup with charts and analyst reports.

Disclaimer

The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.

[1]I highlighted Ezion to my clients just before
its result release on 8 Aug 12 when the price was around $0.965-0.990.
[2]
I highlighted Nam Cheong to my clients on
11 Sep 12 when it was trading at $0.199-0.205.

Leave a Reply

Your email address will not be published. Required fields are marked *