Separately, on July 4, the company announced it won a contract estimated by Loh to be worth US$250 million to US$350 million from Kinetics to convert a 67,000dwt LNG carrier into an FSRU, or Floating Storage Regasification Unit. Seatrium is also working on two other FSRU conversion projects for Kinetics with deliveries scheduled for 4Q25 and 1Q26.
For the upcoming 1HFY2025 earnings to be announced on July 31, Loh expects Seatrium to report a revenue of $4.1 billion, up 2% y-o-y, and earnings of $145 million, up 303% y-o-y. Loh assumes gross margins to expand to around 3.5% vs 2.7% in 2HFY2024.
Loh had earlier held "high hopes" that Seatrium's Texas-based yard could help capture new orders but he has since "moderated" such expectations.
"The US industrial landscape has a myriad of hurdles and many of them appear insurmountable in the near to medium term," explains Loh, listing issues such as the lack of a skilled workforce to undertake complex commercial projects and prohibitive labour costs which start at US$70/hour vs Asian yards, which are more than 50% cheaper at the very least.
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In addition, "haphazard" policies at the federal level, "which change by the month", has been dissuading companies from long-term strategic planning, warns Loh.
As at end of 1QFY2025, Seatrium's net order book was $21.3 billion, an increase from the $20.7 billion as at end-1QFY2024, underpinning Seatrium's multi-year revenue visibility up to 2031.
Loh kept his target price at $2.96, which is based on 1.5 sd above the book value.
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This valuation multiple is five-year average but in Loh's view appears "reasonable" considering Seatriun's strong competitive position globally and within the offshore marine industry as a specialist asset builder, its increasing revenue visibility out to 2031 and the potential for more order wins in 2025.
In the near term, the key re-rating catalyst is the completion of the investigation by the MAS and CAD, adds Loh.
Seatrium shares changed hands at $2.06, up 0.98% as at 10.32 am.
