CGS International's Lim Siew Khee and Meghana Kande have kept their "add" call and $2.90 target price on Seatrium after it announced it is poised to build a second floating production unit for bp.
According to Seatrium in their Feb 13 announcement, this second FPU, like the first, will be deployed in the Gulf of Mexico, which has been renamed by US as the Gulf of America.
Lim and Khande estimate that the contract value of the FPU - which is now at the MOU stage - will be between US$750 million and US$850 million. This brings their estimate of Seatrium's FY2025 order wins to $6 billion.
The CGS International analysts believe this second bp FPU is Seatrium's fifth such order.
"Since 2018, Seatrium has been successfully executing FPU orders, which we believe has allowed it to clinch increasingly higher-value contracts," state Lim and Khande in their Feb 13 report.
They also observe that Seatrium is seeing increasingly positive dynamics in the US, especially in repair contracts.
See also: DPS growth in sight for Hongkong Land
The company's yard in Brownsville, Texas, has begun conducting sea trials for Charybdis, the first US-flagged wind turbine installation vessel in the US. As at Feb 12, the project was 96% completed and the analysts expect delivery from the yard could take place in the next month or so.
Seatrium does not focus on defence shipbuilding in the US, but the analysts believe the reshaping of the US shipbuilding industry could favour Seatrium’s commercial ship repairs business.
Their "add" call and $2.90 target price is based on its 10-year average trading band of 1.5x FY2025 P/BV.
See also: Analysts keep 'buy' on DFI Retail despite sinking into the red in FY2024
Elsewhere, Seatrium, having recently won two contracts to build FPSOs for Petrobras of Brazil, is eyeing the contract for yet another FPSO whose tender is likely to be open by April.
From their perspective, other catalysts for this stock finalisation of investigations by the Monetary Authority of Singapore (MAS) and Commercial Affairs Department (CAD), and better-than-expected second-half margins when it reports its full-year earnings on Feb 21.
On the other hand, downside risks include project cost overruns and order cancellations.
Seatrium shares changed hands at $2.55 as at 2.41 pm.
