This Company Is At Its 52-Week Low: Should You Invest?

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The oil and gas offshore support services industry has been anything but boring. Some of the industry’s leaders, such as Ezion Holdings (SGX: 5ME), have been growing at break neck speed over the past few years – check out Ezion’s history of earnings growth here. Incredibly, those fast-growers are not showing signs of slowing down either.

However, there are a few within the industry who are already showing some weakness in their business. Swiber Holdings (SGX: AK3) is one such example.

Without the help of large non-recurring incomes in 2013 and the first quarter of 2014, the company would have recorded a huge reduction in its earnings. In addition, Swiber actually recorded a 35.6% year-on-year drop in quarterly revenue for the first quarter of 2014. All these less-than-positive developments have been reflected in the company’s share price, which has dropped from its 52-week peak of S$0.77 to its current 52-week low of S$0.55. Is Swiber worth a look for investors currently?

The risks

Besides the huge drop in revenue in the first quarter of 2014 and a decrease in operating profits, there’s also the issue of a build-up in trade receivables that are past their due date. In 2010, Swiber had trade receivables of US$109.3 million of which US$26.6 million were past their due dates but not impaired (that’s 24% of total trade receivables); in 2013, the respective figures had grown to US$510.6 million and US$158.7 million.

Even though the company had been impairing some of its trade receivables (US$17.4 million of receivables were impaired in 2013), the amount outstanding is still cause for some worry as it’s 31% of the company’s total trade receivables.

Is the company set for more impairment in the future? Does the company’s large amount of trade receivables past due tell us something about the credit control that the company has with its clients? Only time can answer these questions.

Is it cheap enough?

Swiber currently trades at a price to book ratio of just 0.5 times. With all said and done, a fellow investor once taught me that, regardless of how bad a situation a company is in, the key question to ask is always, “Is it cheap enough?” So, is Swiber cheap enough? That would be a question each investor has to answer for himself.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.