In a results briefing on Nov 13, Seatrium’s CEO Chris Ong said the group is making “steady progress” towards the targets it set for FY2028. In addition to revenue, Seatrium aims to report an ebitda of over $1 billion, a return on equity (ROE) of over 8% and a net debt to ebitda of 2.0 to 3.0 times then.
That said, Lee notes that it’s still early days and the company should be able to win some projects from its pipeline of opportunities worth some $30 billion. “Discussions with BP regarding the Tiber FPU (floating production unit) project continue and could meaningfully boost the order book.”
Lee adds that Seatrium’s repairs and upgrades segment remains “resilient” supported by recent contract wins. Furthermore, the group’s ongoing divestment of its non-core assets should support Lee’s mid-cycle operating margin estimate of 10.3%.
On the dispute with Maersk over the wind turbine project, Ong said the group intends to proceed with delivery on Jan 30, 2026. However, the group may have to make a provision for the remaining payment of 80%, which could weigh on its near-term cash flow, Lee notes. The contract had a total value of US$475 million or $610 million.
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To this end, Lee has maintained his fair value estimate of $2.92 as he sees lower taxes offsetting the provision factored in for the Maersk project. In his view, Seatrium’s shares are undervalued and offer upside of over 30%.
“Despite market concerns around potential provisions for the Maersk project and sluggish order wins, we expect project wins to average out over the cycle,” he says. “Our view is that global energy demand may skew higher than the 2% - 3% average growth seen in the past as electricity needs increase. This should drive natural gas production and demand for Seatrium's services.”
OCBC Investment Research’s Ada Lim also maintained her fair value estimate of $2.76 despite Seatrium’s “series of unfortunate events”.
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To her, the notice of termination from Maersk is likely to remain an overhang on Seatrium’s share price in the long term. The unexpected cancellation is also a reflection of the ongoing volatility in the US offshore market.
“As this is a legacy contract awarded to Sembcorp Marine in 2022, we think the terms were likely less favourable for Seatrium (i.e. less attractive margins and 20/80 payment terms),” she says.
In addition, the multi-year probe in Brazil, commonly referred to as “Operation Car Wash”, is not quite in Seatrium’s rearview mirror, Lim opines.
The group had received a notice of arbitration from Keppel on Aug 26, where Keppel is seeking $68.4 million plus interest and costs under an agreement to indemnify Keppel for claims over Operation Car Wash.
Seatrium had previously reversed a provision of $82.4 million made under the indemnity agreement after it expired on Feb 28, since no binding and legally enforceable agreements had been signed with the Brazilian authorities at the time.
While Lim believes Seatrium’s long-term trajectory towards its FY2028 targets remain “broadly intact” she remains cautious and has factored in provisions of $20 million and $80 million in her projections for the FY2025 and FY2026 respectively.
“We also dial back our expectations around order book growth amidst slowing order win momentum and sequential declines in Seatrium’s net order book,” she adds.
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CGSI lowers TP to $2.67
CGSI’s Lim Siew Khee and Meghana Kande have lowered their target price to $2.67 from $2.80 as they lower their earnings per share (EPS) estimates for FY2026 to FY2027 by 5% to 6% on lower gross margin assumptions. The lower estimates, which were offset by lower financing and general and administrative expenses, led the analysts to increase their FY2025 EPS estimates by 1%.
Like the rest of their peers, Lim and Kande note Seatrium’s “weak” order wins in 3QFY2025 and that sizeable wins are a key catalyst. Yet, the analysts have maintained their order win forecasts of $3 billion and $6 billion for FY2025 and FY2026 respectively.
Similar to Morningstar’s Lee, Lim and Kande are “hopeful” that Seatrium could convert the memorandum of understanding (MOU) signed for building an FPU for BP into a contract worth about $1 billion to $1.2 billion.
While no financial numbers were disclosed in Seatrium’s 3QFY2025 update, the analysts estimate the group’s quarterly revenue to be at $2.4 billion. This translates to $4.7 billion for the 2HFY2025 on an annualised basis, 9% lower y-o-y and 12% down h-o-h.
To achieve its FY2028 targets, Seatrium will have to clinch order wins of $6 billion to $10 billion per year in FY2026 and FY2027.
Shares in Seatrium closed 2 cents lower or 0.92% down at $2.16 on Nov 14.
