Comprehensive Company Analysis: Seatrium, Mapletree Logistics Trust, and Grand Banks Yachts

Broker Name: Lim & Tan Securities

Date of Report: November 28, 2024

Seatrium: Navigating Legal Challenges

Seatrium, trading at \$1.95, is currently amidst complex legal proceedings. The company has been dealing with a legacy litigation involving a majority-owned joint venture entity related to a rig contract. This dispute arose from a pre-existing disagreement with a customer over contract value adjustments due to cost escalation. Despite these challenges, Seatrium secured an interim injunction from the Singapore courts, preventing payment under a \$126.6 million standby letter of credit (SBLC). However, on November 26, 2024, the court dismissed Seatrium’s application for a final injunction, a decision the company plans to appeal. The interim injunction remains effective until the appeal’s conclusion.

Financially, Seatrium has made provisions for the full amount under the SBLC, and it expects no adverse impact on its earnings per share or net tangible assets per share for the financial year ending December 31, 2024. Despite a robust order book and continued share buybacks, Seatrium’s valuation appears fair, trading at 40x forward PE and 1x PB with no dividends. However, the closure of a corruption probe by Singaporean authorities remains pending. Thus, Lim & Tan Securities maintains a “HOLD” recommendation on Seatrium.

Mapletree Logistics Trust: Strategic Divestment for Growth

Mapletree Logistics Trust (MLT), priced at \$1.28, has completed a strategic divestment of two properties in Japan, Toki Centre and Aichi Miyoshi Centre, for a combined sale price of JPY4,250 million (approximately S\$37.5 million). This move aligns with MLT’s strategy to rejuvenate its portfolio by divesting non-core assets. The sale prices exceeded the latest valuations, reflecting MLT’s successful portfolio management.

With a portfolio of 183 properties valued at S\$13.3 billion, MLT aims to invest in modern logistics facilities with higher growth potential. The trust is capitalized at S\$6.5 billion, trading at 20x PE and 1x book with a yield of 6.3%. Lim & Tan Securities rates MLT as “Accumulate,” given its decent yield and a consensus one-year target price of \$1.63, implying a potential 26% return. The downside risk appears limited, with MLT trading near its Covid-19 lows.

Grand Banks Yachts: Expanding Horizons in the US

Grand Banks Yachts (GBY), currently at S\$0.585, has announced the expansion of its sales and service operations to San Diego, California. This strategic move aims to strengthen its presence on the West Coast, leveraging the experience of Michael Kusler, a seasoned yacht sales specialist. The expansion aligns with Grand Banks’ strategy to capture market share in the US and introduce new models to yachting enthusiasts.

GBY is capitalized at S\$109 million, trading at 4.8x forward PE and 1.3x PB, with a dividend yield of 2.6%. The upcoming yard, expected in December 2024, will boost production capacity by 15%, focusing on larger boat sizes with higher selling prices and margins. With a net cash position of \$0.19 per share, Grand Banks’ growth potential appears promising. Lim & Tan Securities maintains a “BUY” recommendation with a longer-term target price of S\$1.05.

Conclusion

Lim & Tan Securities’ comprehensive analysis highlights the strategic maneuvers and challenges faced by Seatrium, Mapletree Logistics Trust, and Grand Banks Yachts. Each company navigates its path with distinct strategies, reflecting their commitment to growth and resilience amidst market dynamics. Investors are advised to consider these insights when making informed decisions in the financial markets.