4Q08 net loss ? missed expectations. Swiber Holdings (Swiber)'s 4Q08 revenue grew 69% YoY to US$102.9m but cost of sales increased 147% YoY due to the delayed delivery of two vessels, Swiber Concorde and Swiber Supporter, as well as higher subcontractor costs. This marks the second consecutive quarter whereby the increase in cost of sales exceeded the growth in revenue, reflecting presence of higher project execution risks as well as the need for greater cost containment, going forward.

Going forward, we believe financing concerns will continue to take centrestage.We estimate Swiber's working capital to be negative by FY10 and quick ratio to exhibit a decreasing trend (FY07: 2.2, FY08: 1.4, FY09F: 1.0, FY10F: 0.8). We opine that this deterioration may be a cause of concern, especially if Swiber is faced with earnings erosion. If we further assume Swiber does not secure any new order wins, Swiber's net debt-to-equity ratio will reach 1.5x by FY10.

Downgrade to SELL, TP reduced to S$0.23 (from S$0.62 previously). We reduce our FY09 recurring net profit by 62% as we cut our FY09-10 new order assumptions to US$150m/year, trim operating profit margins by 50% and take into account higher operational expenses. We have also introduced our FY10 estimates, and rolled over our valuation based on 3x FY10 recurring earnings. We believe Swiber's share price will continue to be pressured, first by financing concerns, then by signs of weakness in earnings quality.