Swiber

Swiber sank into a 2Q15 net loss of US$4.6m from a net profit of US$7.5m a year ago, deepening its 1H15 net loss to $8.3m (1H14: US$55.5m profit).

For the quarter, revenue slipped 8.7% y/y to US$200.2m as sales from SE Asia (-49.1% to US$65.8m) and South Asia (-97.3% to US$1.1m) slumped due to less contracts executed. This was partially mitigated by an over two-fold jump in contribution from Latin America to US$128.7m (+217%).

Gross margins expanded 3ppt to 10.8% due to stringent cost control. As a result, gross profit jumped 26.5% to US$25.6m.

However, other operating income plunged 95.2% to US$0.9m due to absence of FX gain of US$4.6m, disposal gain of US$4m and fair value gain on financial instruments of US$3.5m.

This was compounded by a 56.6% drop in associate contributions to US$2.9m and a 219.2% spike in taxes to US$5.4m.

Amid the challenging market, the group managed to fill its order book to a record US$1.7b as at 5 Aug ’15 from US$1.4b in Feb following new contract wins in recent months.

Net gearing remains elevated at 1.45x but operating cash flow turned positive US$29.8m from a net US$78.6m outflow in 2Q14.

Moving forward, the oil and gas industry continue to be plagued by oil price weakness, prompting oil majors to delay or reduce capex. Despite this, management believes that its focus on shallow water field development and production activities will put it in better stead to weather the challenges.

Given the bleak market environment, sentiment over Swiber has been very poor, resulting in the counter trading at a massive 85% discount to its NAV/share of US$0.62.