Seatrium Ltd, born from the merger of Sembcorp Marine and Keppel Offshore & Marine in 2023, is making waves in the offshore and marine (O&M) sector. Under the leadership of CEO Chris Ong, the company is pursuing an ambitious transformation strategy, blending legacy strengths with a forward-looking focus on renewable energy.
Financial Turnaround and Ambitious Targets
In FY2023, Seatrium reversed its EBITDA from a negative $7 million in FY2022 to $236 million, though it reported a net loss of $1.94 billion due to a $2 billion impairment on surplus assets. By 2028, the company aims to achieve:
- EBITDA: Over $1 billion.
- Return on Equity (ROE): More than 8%.
- Net Debt to EBITDA Ratio: Between 2 to 3 times.
Despite these lofty goals, Ong acknowledges the journey ahead. “These targets are ambitious, but we are committed to overachieving them,” he said. Analysts have shown growing faith, with nine active coverage ratings unanimously listing Seatrium as a “Buy.”
Securing High-Value Contracts
Seatrium’s strategic pivot is evident in its robust $24.4 billion net order book, comprising 30 projects with deliveries stretching into 2031. Highlights include:
- Petrobras Contracts: Two FPSO vessels valued at $11 billion, with construction starting in 2025.
- Renewables Expansion: Offshore wind contracts, such as the $704MW Revolution Wind Farm for Ørsted, set to transform Seatrium into a key player in the floating wind market.
In 1HFY2024, the company delivered $4 billion in revenue, up 39% y-o-y, supported by newbuild projects and 192 completed repairs.
Navigating Legacy Issues
Despite the optimism, Seatrium continues to grapple with legacy challenges:
- Legal Overhang: Ongoing investigations linked to past corruption scandals and contractual disputes have weighed on market sentiment.
- Share Price Performance: As of December 3, 2024, Seatrium shares remain at $2, far below their adjusted peak of $67.16 in April 2011.
Ong remains transparent, stating, “These litigations are well-managed, but court processes take time.”
Renewed Focus on Sustainability
Seatrium is diversifying its business mix. By 2028, the company aims to balance its portfolio between oil and gas (currently 65%) and renewables/green solutions (35%). The energy transition is a central theme, with Seatrium investing heavily in offshore substations and floating wind farms.
Ong is optimistic about this shift, saying, “Energy demand will continue to grow, and renewables will remain the fastest-growing sector.”
Resumption of Dividends
As analysts project profitability for FY2024, questions about dividends loom large. Ong is cautious but optimistic, noting, “Shareholders’ total returns are a key part of our scorecard. Dividends will come when we can sustain them.”
Analyst Sentiment
Analysts remain bullish, with target prices ranging from $2.10 (Citi Research) to $3.00 (Macquarie, CLSA, and DBS Group Research). The consensus underscores confidence in Seatrium’s ability to capitalize on its engineering expertise and market recovery.
What’s Next for Seatrium?
With a clear focus on resilience and sustainability, Seatrium is poised to reclaim its standing in the O&M sector. Its strategic investments in renewables and cost efficiency position it for a brighter future, even as it navigates legacy challenges.
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