Excerpts from UOBKayHian report

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Seatrium Limited (SGX: S51)

• Seatrium’s outlook in 2024 remains bright, in our view, as we expect new order wins in both the oil & gas as well as renewables sectors.
• In the near term, this could come in the form of two Brazilian FPSOs while in the medium to longer term, renewables demand remains well supported.
• The company’s strategic review remains on track to be completed by end-23.

Maintain BUY. Target price: S$0.19.

Positive outlook

Seatrium presented an upbeat outlook on the offshore marine and renewables industry to nearly 40 institutional investors at the UOB Kay Hian Asian Gems conference earlier this week.

While new rig orders may be 1-2 years away, the company will continue to focus on a return to profitability, safe and on-time execution of its
current S$19.7b orderbook as well as to fill up the gap in its orderbook pipeline for 2026-29.

Strategic review to be completed by end-23

Management commented that its “ambitious” strategic review is ongoing and, among other issues, will address:

• extraction of cost and revenue synergies between the merged companies
• the inevitable consolidation of its global network of yards,
• the company’s ideal capital structure going forwards
• potential consolidation of its shares (which appears to be a 2024 event in our view), and
• target orderbook mix between renewables and oil & gas projects.

In addition, the strategic review will also look at what sort of investments the company will need to make in the areas of digitisation, robotics and artificial intelligence, which will partially address the issue of a chronic labour shortage that has affected many industries globally.

Update on Brazilian FPSOs

The company has submitted its tender for the P-84 and P-85 FPSOs for Petrobras’ Atapu and Sépia fields respectively and, as is standard procedure, Seatrium is currently going through the negotiation with Petrobras regarding the price as well as a technical review.

Management appeared somewhat optimistic that the results of the tender could be known by year end.

Valuation/Recommendation

We maintain our BUY rating on Seatrium with a P/B-based target price of S$0.19. Our target P/B multiple of 1.5x is 2SD above the company’s five-year average of 1.0x and is pegged to its 2024 book value of S$0.125.

Given the company’s exposure to the offshore marine upcycle, we strongly believe that Seatrium’s current P/B valuation is inexpensive. Risks include higher-than-expected provisions for 2023, negative news flow regarding its CPIB case and volatile oil prices.

You can find the full report here and the company website here.