Brokers' take

Singapore O&M | Underweight

UOB Kay Hian, Aug 1

THE turnaround by Swiber Holdings from liquidation to judicial management only delays the inevitable cascade defaults in the sector. A prolonged lower oil price environment and the recent spate of poor earnings from oil majors will prevent the much-needed rise in service price required for the sector to make a turnaround. With liquidity pressure in the sector mounting amid a prolonged downturn, we downgrade the sector to "underweight".

In a dramatic turnaround, Swiber made a late-night announcement on July 29 that it would now place itself under judicial management, instead of liquidation. This was done at the behest of its major financial creditor. Separately, Pacific Radiance announced that it was providing US$10.1 million in respect of doubtful receivables owing to Swiber's related entities. The provision is likely to further impact Pacific Radiance's earnings negatively, which had already reported a loss of…