OCBC Investment Research (OIR) analyst Ada Lim has increased her fair value estimate on Seatrium to $2.82 from $2.64 previously after shares in the offshore and marine (O&M) company surged by 10.87% to close at $2.55 on Feb 13.
The share price surge came after Seatrium announced that it signed a memorandum of understanding (MOU) with BP to build the Tiber floating production unit (FPU) in the US Gulf Coast on Feb 13. The contract will be subject to a final investment decision by BP and will be announced later this year.
The MOU marks the second project with BP following the contract win to build BP’s Kaskida FPU announced on Dec 24, 2024.
Seatrium also announced, on Jan 27, that it won a contract from Penta-Ocean Construction to carry out engineering, procurement and construction (EPC) works for a 5,000-tonne fully revolving heavy lift vessel project, Lim notes.
In addition to its recent contract wins, Lim likes Seatrium’s outlook with US President Donald Trump’s plans to unleash US oil and gas production and boost output.
Trump’s plans include the signing of orders aimed at promoting oil and gas development in Alaska in a bid to lower consumer prices and improve national security, notes Lim.
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“Such policy developments may potentially drive global oil majors to raise their oil gas capital expenditure (capex), potentially allowing Seatrium’s order book to surprise on the upside,” she writes.
“At its previous business update, Seatrium shared that two ongoing legacy projects in US shipyards are on track to be complete by the end of 2024, which should also drive an improvement in gross margins going forward,” she adds.
Lim’s new fair value estimate is pegged to a 12-month forward price-to-book (P/B) multiple of 1.35 times. The analyst has kept her “buy” call unchanged.
Seatrium will be releasing its FY2024 ended December results before the market opens on Feb 21.
As at 2.08pm, shares in Seatrium are trading 2 cents lower or 0.78% down at $2.55.
