In its Jan 22 filing, Seatrium says it is in disagreement with Aibel over the direct scopes of work and allocation of scope responsibilities for the DolWin 5 project.
Aibel is also claiming an additional EUR17 million over certain matters that allegedly falls within the work scope of both parties. The arbitration requests were filed with the Stockholm Chamber of Commerce.
Seatrium says that there is mutual desire for these differences to be “amicably resolved” by an independent tribunal and hence both parties filed the requests.
The Dolwin 5 project contract comprises the design, engineering, procurement, construction, installation and commissioning of a 900MW offshore converter platform. Keppel Offshore and Marine (before its merger with rival Sembcorp Marine to form Seatrium) and Aibel joined forces to secure the contract in 2019.
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Seatrium asserts that despite Aibel failing to “achieve timely design freeze” with multiple changes to its design, it has fulfilled its direct scope in Singapore with the platform sailing away to Aibel’s facility for further works.
Seatrium also claims that both parties mutually agreed that Aibel would be responsible, after sailaway, for works within Seatrium’s direct scope that were not completed due to Aibel’s late design freeze.
Lim and Kande point out that the project, worth $560 million for Seatrium, was secured pre-merger and is not part of TenneT’s 2GW programme in which Seatrium has four high voltage direct current (HVDC) orders.
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They also note that the project is on progressive milestone billing and that based on Seatrium’s preliminary assessment, its direct scope claims exposure is capped at EUR5 million.
As such, coupled with Seatrium recently resolving its dispute with Masersk, CGSI believes that “litigation noises” could cap Seatrium’s share performance. They maintain their valuation of Seatrium at $2.67, which is 1.3 times of 2026 forecasted P/B, giving a 10% discount to the counter’s historical P/B of 1.5 times. Margin expansion is a re-rating catalyst while cost overruns and project cancellations remain risks to watch out for.
Meanwhile, Citi’s Hilado also notes that the project is on progressive milestone payment. He has tried to narrow down the remaining payments due to Seatrium and points out that based on 9M 2025 order book breakdown, the project should be part of a bucket of potential residual revenue bookings worth $438 million. He is unsure if Seatrium’s demand of EUR180 million is representative of the balance amount as it may include penalties, damages, etc.
Coupled with oil price volatility, the potential damage of Seatrium’s standing from a premerger contract dispute is another factor that could weigh down the share price, according to Hilado.
Despite the above, Hilado reaffirms his belief in Seatrium with an unchanged TP of $2.65. He applies a target multiple of 1.2 times on FY 2026 estimated earnings and expects the market to recognise Seatrium’s long-term prospects as new higher margin contracts should support higher returns. He adds that the TP implies an estimated P/E of 17 times for 2025 and enterprise value to ebitda ratio of nine times.
As at 2.45pm on Jan 23, Seatrium’s shares remain flat at $2.12.
