Swiber delivered a disappointing set of 3Q08 results, with net profit dipping 19% y-o-y to US$16.0m. The main culprit was the slump in gross margin to only 20% in 3Q08, vs. 26% in 1H08, which Swiber attributed to the greater use of third-party vessels due to worse than expected weather condition that obstructed work progress. Headline net profit in 9M08 only increased 59% y-o-y to US$47.2m in FY08, which is below expectation.
The silver lining is the reduced financing concern, with Swiber prudently postponing the construction of the deepwater drilling vessel till there are signs that the current credit crunch is over. The committed capex now drops to only US$336m, which is more than matched by an estimated US$413m in secured funding and US$77m in estimated cash flow from operation in the 4Q08-FY10 periods. Swiber has also received full payment for the 6 vessels delivered to-date under sales and leaseback agreements (SLAs), and have collected 20-25% downpayment for the remaining 9 vessels under SLAs.
Still, in view of the dismay earnings performance in 3Q, we have revised down our net profit forecast to US$70m for FY08 and recurring net profit to US$47m. We also forecast Swiber's net gearing to be 1.1x by end FY08 (vs. 1.0x as of end 3Q08), 0.5x by end FY09, and 0.2x by end FY10.
DBS Group Research, Equity; 18 Nov 2008
Wednesday, November 19, 2008
Wednesday, January 16, 2008
GIC pumps $9.8b into troubled Citigroup
January 16, 2008 — aldurvale
THE Government of Singapore Corporation (GIC) is investing US$6.88 billion (S$9.82 billion) in the troubled American banking giant Citigroup, it said last night.
It is GIC’s second largest investment and came on a day of dreadful news for Citi, which has been battered by the credit crisis rocking the global financial system.
Citi reported US$9.83 billion in net losses for the fourth quarter, and is reportedly planning to axe 20,000 staff or more. It also took a massive US$18.1 billion write-down for exposure to dodgy sub-prime mortgages.
But GIC stressed yesterday that what at first glance might look like a risky investment has built-in safeguards that will protect its downside. The use of a certain kind of security means GIC gets a relatively lower rate of return, but has more protection if Citi’s share price plummets further.
Indeed, the investment’s structure ‘gives appropriate downside protection’ and meets GIC’s ‘long-term investment objective in terms of risk and return’, said Dr Tony Tan, GIC deputy chairman and executive director, in a statement yesterday.
Dr Tan described Citigroup as ‘an excellent addition to GIC’s portfolio as it is one of the largest banks in the world with an attractive global franchise’. He added that GIC has confidence in Citigroup’s board of directors, who have taken ‘decisive action to… strengthen the balance sheet and profitability of the bank’.
The Straits Times understands that the long-standing ties between GIC senior executives and Citi’s leadership were partly why GIC was one of the first institutions the US bank approached during this most recent round of cash-raising.
Citi chief executive Vikram Pandit told a results briefing in New York yesterday that GIC is ‘a widely respected, long-term oriented investor’ and that he has ‘known the principals for years’. The announcement caps a dismal period for Citi, which has been desperate to shore up its capital base.
GIC’s investment was the largest in a new round of fund-raising that netted a total of US$12.5 billion from private investors, including the Kuwait Investment Authority, Saudi Prince Alwaleed bin Talal and asset management firm Capital Research & Management.
Citi is also raising US$2 billion more from a public offering.
GIC made a similar strategic investment less then a month ago, spending 11 billion Swiss francs (S$14.45 billion) to buy a stake of about 9 per cent in the beleaguered Swiss bank UBS, another victim of the sub-prime meltdown.
The two deals are structured differently. The UBS investment is in the form of ‘convertible notes’, which pay an annual return of 9 per cent. These must be converted into UBS stock within two years of the date of issue.
The Citi deal employs a type of security called a perpetual convertible security. This provides a fixed annual dividend of 7 per cent and allows GIC to hold the securities for as long as it chooses, subject to certain conditions. GIC may convert these securities into shares at a fixed price, which will be 20 per cent above the stock’s average price over the next few trading days.
Citigroup shares closed in New York on Monday at US$29.06, a drop of 47 per cent over the last year.
GIC, which manages Singapore’s reserves, already holds a 0.3 per cent stake in Citi. The new investment will allow it to raise its holding to about 4 per cent, making it one of the largest single shareholders. But GIC stated that it is not seeking a board seat at Citi.
Source: The Straits Times 16 Jan 08
THE Government of Singapore Corporation (GIC) is investing US$6.88 billion (S$9.82 billion) in the troubled American banking giant Citigroup, it said last night.
It is GIC’s second largest investment and came on a day of dreadful news for Citi, which has been battered by the credit crisis rocking the global financial system.
Citi reported US$9.83 billion in net losses for the fourth quarter, and is reportedly planning to axe 20,000 staff or more. It also took a massive US$18.1 billion write-down for exposure to dodgy sub-prime mortgages.
But GIC stressed yesterday that what at first glance might look like a risky investment has built-in safeguards that will protect its downside. The use of a certain kind of security means GIC gets a relatively lower rate of return, but has more protection if Citi’s share price plummets further.
Indeed, the investment’s structure ‘gives appropriate downside protection’ and meets GIC’s ‘long-term investment objective in terms of risk and return’, said Dr Tony Tan, GIC deputy chairman and executive director, in a statement yesterday.
Dr Tan described Citigroup as ‘an excellent addition to GIC’s portfolio as it is one of the largest banks in the world with an attractive global franchise’. He added that GIC has confidence in Citigroup’s board of directors, who have taken ‘decisive action to… strengthen the balance sheet and profitability of the bank’.
The Straits Times understands that the long-standing ties between GIC senior executives and Citi’s leadership were partly why GIC was one of the first institutions the US bank approached during this most recent round of cash-raising.
Citi chief executive Vikram Pandit told a results briefing in New York yesterday that GIC is ‘a widely respected, long-term oriented investor’ and that he has ‘known the principals for years’. The announcement caps a dismal period for Citi, which has been desperate to shore up its capital base.
GIC’s investment was the largest in a new round of fund-raising that netted a total of US$12.5 billion from private investors, including the Kuwait Investment Authority, Saudi Prince Alwaleed bin Talal and asset management firm Capital Research & Management.
Citi is also raising US$2 billion more from a public offering.
GIC made a similar strategic investment less then a month ago, spending 11 billion Swiss francs (S$14.45 billion) to buy a stake of about 9 per cent in the beleaguered Swiss bank UBS, another victim of the sub-prime meltdown.
The two deals are structured differently. The UBS investment is in the form of ‘convertible notes’, which pay an annual return of 9 per cent. These must be converted into UBS stock within two years of the date of issue.
The Citi deal employs a type of security called a perpetual convertible security. This provides a fixed annual dividend of 7 per cent and allows GIC to hold the securities for as long as it chooses, subject to certain conditions. GIC may convert these securities into shares at a fixed price, which will be 20 per cent above the stock’s average price over the next few trading days.
Citigroup shares closed in New York on Monday at US$29.06, a drop of 47 per cent over the last year.
GIC, which manages Singapore’s reserves, already holds a 0.3 per cent stake in Citi. The new investment will allow it to raise its holding to about 4 per cent, making it one of the largest single shareholders. But GIC stated that it is not seeking a board seat at Citi.
Source: The Straits Times 16 Jan 08
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