DBS Group Research has kept its 'buy' call and $3 target price on Seatrium after the company announced it has won a heavy lift vessel contract from Japan's Penta-Ocean Construction.
The contract was not disclosed by Seatrium but is estimated at between $600 and $700 million by DBS in its Jan 28 note, which will add to the company's order book estimated at some $23 billion as at end of last year.
POC, a leading marine contractor, will deploy the vessel in the country's growing offshore wind market.
This vessel is noted to be the fifth and largest vessel to be added to POC’s fleet, enabling them to undertake larger wind turbine projects.
Seatrium is due to report its FY2024 earnings on Feb 21 and DBS expects margin and earnings improvements.
"We are also looking forward to the conclusion of MAS/CAD investigation pertaining to the Brazil Car Wash Operation case, removing an overhang," says DBS.
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"We believe Seatrium is on track to deliver strong earnings recovery this year with the delivery of most legacy contracts in 2024 and execution of higher margin new contracts (10-15% gross margin) going forward.
DBS notes that Seatrium has guided for some $300 million cost savings to be materialised in 2024-2026, and is progressing well and ahead of target.
Its $3 target price is based on 1.5x P/BV.
Seatrium shares closed at $2.22 on Jan 27.
