“The DPA will come into force only when the High Court approves it after determining that it is in the interests of justice and that its terms are fair, reasonable and proportionate,” reads a statement from the AGC.
According to Seatrium, the company has reversed $14 million in provisions for the 1HFY2025. The penalties also have no material impact on its FY2025 earnings or net tangible assets (NTA) per share.
Following the announcement, Seatrium’s shares, which were halted before the market opened, traded 1.68% higher at $2.42 when trading resumed at 11.30am on July 30. “We believe the conclusion of the investigation will lift the remaining overhang on Seatrium,” says Citi analyst Luis Hilado in a flash note.
In previous reports, other analysts have also noted that a key re-rating catalyst would be the completion of the investigations by the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD).
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To Hilado, the next milestone will be improving margins and financials during Seatrium’s results.
Better 1HFY2025 results
For the 1HFY2025 ended June, Seatrium saw improvements in its results. While revenue grew by 34% y-o-y to $5.4 billion, due to the “strong execution” of its order book, earnings surged by 301% y-o-y to $144 million, thanks to better margins.
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Gross margins, which were shared for the first time, doubled y-o-y to 7.4% in 1HFY2025. The higher margins were attributed to a mix of higher-margin projects, operational efficiencies and continued cost optimisation.
The management now has “better clarity” as to where there is excess equipment among other initiatives, after two years into operating as “One Seatrium”, which refers to the massive merger and reorganisation involving Keppel’s offshore and marine assets. “This enables us to streamline operations, which improves utilisation, monetise non-core assets, and at the same time, deploy capital prudently to enhance asset capabilities,” says CFO Stephen Lu.
In the same period, ebitda rose by 31% y-o-y to $407 million while return on equity (ROE) surged to 4.5 times from 1.1 times. Seatrium’s net leverage ratio also improved to 4.5 times from 1.1 times.
However, investors remained unimpressed by Seatrium’s performance. After the results announcement, Seatrium’s shares closed at $2.27, down 5.42% from its previous close of $2.40. While Seatrium’s half-year revenue met the consensus’ full-year forecast of $9.49 billion, its ebitda and net profit fell short, compared to the estimates of $931.9 million and $379.5 million, respectively.
As at June 30, Seatrium’s net order book stood at $18.6 billion, down from its decade-high order book of $26.1 billion as at June 30, 2024. No new orders were mentioned, although the company is eyeing $30 billion worth of pipeline opportunities. In comparison, Seatrium secured over $13 billion in new orders in the 1HFY2024 ended June 30.
When asked about the pipeline and historical conversion rates, CEO Chris Ong noted that the $30 billion is a “very good indication” of the intensity of its commercial units’ efforts. However, it is difficult to pin down the quantum of new orders Seatrium will eventually have. “Each tender has different challenges or opportunities in terms of what we actually look at, and it has very different tender strategies. And also, customers are very different.”
The $30 billion itself shows there’s no shortage “of pipeline and excitement pertaining to the market”, Ong adds.
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When asked about the apparent slowing of new orders, Ong says it came down due to project executions, leading to the higher revenue. He also alluded to the “uncertain” first half of the year, which “tested the resilience of global markets”.
“Trade tensions and geopolitical uncertainties have postponed investment decisions, creating headwinds across maritime trade and in offshore development,” says Ong, who adds that the uncertainty seen so far is a global issue and not localised.
However, he remains upbeat that the company is riding on rising global demand for energy driven by emerging markets, data centre growth and artificial intelligence (AI).
The uncertainty, which has led to a mix of energy transition ambitions and energy security, should be seen as an opportunity and not a risk. “End of the day, when we talk about energy security needs and demand needs, there will be very complex projects that are required to unlock energy supply,” says Ong.
“So it’s not just about business as usual today, as you know, the breakdown in trade in the countries that bring in another dimension, which is energy security,” he adds. “And from the very first day of our strategy, we have mentioned that our very diverse yet resilient approach to energy transition and demand actually is a big, huge opportunity for us.”
Even as it aims to win new orders, Ong will keep a clear focus on profitability. The company has a clear goal, which is to continue to deliver “better and better” margins. “That is the mandate. I don’t think we’ll say otherwise,” says Ong.
That said, the focus of 1HFY2025 was on lowering its costs. During the period, Seatrium’s finance costs fell by 5% y-o-y to $54 million.
Lu notes that the lower debt cost was partly driven by the decline in base rate in Singapore, although if the US Federal Reserve drops its rates, it will help.
Working towards 2028
Seatrium, which shared several goals at its first investor day in March 2024, said it aims to grow its ebitda by four times to over $1 billion by FY2028. The company also aims to deliver a return on equity of over 8% and identify $300 million in annualised synergies and cost savings.
To this, Ong says the company always has an ambition to “deliver better results”.
“If there’s any doubt, always be guided by the 2028 targets that we have shared. And you can see that we are chugging along steadily towards what we’ve promised,” he adds.
In a post-results note, Citi’s Hilado maintained his “buy” call and target price of $2.65, but lowered his FY2026 and FY2027 revenue estimates by 3% and 6% respectively, given the “lack of significant order wins” to date. As such, the analyst has also reduced his order win assumptions to $2.5 billion from $10 billion.
Despite revenue certainty for the next three years based on the latest $18.6 billion net order book, we acknowledge that the share price performance will remain linked to order win momentum, but we believe continued execution of better margins with the existing order book in 2HFY2025 will provide uplift,” he says.
To him, any share price weakness seen during the “order win lull” is an opportunity to accumulate Seatrium’s shares.
