"As yard activities increase in FY2023, losses should narrow. While potential integration hiccups and costs could pose some downside risks this year, these should be one-offs," she says.
"Looking beyond, we expect Seatrium to reap synergies from the merger, on both the cost and revenue front, and turn profitable by FY2024," adds Ho.
Investors might recall that Sembcorp Marine's share price has plunged more than 90% from its five-year-high of $1.50 in early 2018.
"However, the tide is turning now – balance sheet has strengthened following two rounds of rights issues and orderbook has climbed from less than a year's worth of revenue coverage to 3 times currently," says Ho, whose target price of 18 cents is based on 1.5x FY24F PB, in line with peers' median.
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She estimates that 40% of the re-rating could come from the earnings turnaround and 60% from an uplift in the valuation multiple from 1.2x PB towards 1.5x PB, on the back of the robust order momentum, integration synergies, as well as solid management execution.
Meanwhile, key risks include an unexpected plunge in oil prices, which could dampen the momentum of order wins, while integration hiccups and expenses could delay earnings recovery. The investigations into its Brazil yard remain an overhang as well, says Ho.
