Overview of Seatrium Ltd

Seatrium Ltd is a leading integrated shipyard providing one-stop engineering solutions for the offshore oil and gas industry, as well as the renewables sector. Following its merger with Keppel Offshore Marine in the first quarter of 2023, the company has established itself as a global player with a robust orderbook and a diversified portfolio of projects.

The report maintains a BUY recommendation for the stock with a target price of S\$2.80, reflecting a 36.7% upside from the current share price of S\$2.07. Seatrium is positioned in the Industrials sector, with a market capitalization of S\$7,009.1 million (US\$5,147.7 million) and major ownership by Temasek Holdings (37.9%).

Positive Momentum in 4Q24

The fourth quarter of 2024 proved to be eventful for Seatrium, with significant developments driving its business forward:

• Key Contract Win: Seatrium secured a major contract for the engineering, procurement, construction, and commissioning (EPCC) of BP’s Kaskida project in the Gulf of Mexico. This contract, estimated at S\$500–600 million, enhances its already robust net orderbook, which stood at S\$24.4 billion at the end of 3Q24, with project deliveries scheduled until 2031.
• Future Opportunities: The Kaskida project places Seatrium in a strong position to win follow-on contracts for BP’s other Gulf of Mexico deepwater projects, Tiber and Gila. Together, these fields contain an estimated 9 billion barrels of recoverable reserves, offering significant potential for long-term profitability.
• Completion of Legacy Contracts: The completion of low-margin contracts, especially in the US, is expected to alleviate a key overhang on Seatrium’s share price. Management anticipates these projects will be finalized by the end of 2024.

Successful Project Deliveries

Seatrium demonstrated its operational excellence with the delivery of two jack-up rigs to Borr Drilling in 2024:

• “Var” Jack-Up Rig: Delivered nearly a year ahead of schedule, the KFELS Super B Class 400-foot jack-up rig was executed within budget and added approximately S\$200–210 million in final payments.
• “Vali” Jack-Up Rig: Delivered in August 2024, this rig also contributed to the company’s sequential EBITDA improvement in the second half of 2024.

Strategic Expansion into the Indian Market

Seatrium’s memorandum of understanding (MOU) with Cochin Shipyard, an Indian government enterprise, marks a strategic entry into the busy Indian offshore oil and gas market. The partnership focuses on jointly designing and supplying critical equipment for jack-up rigs and mobile offshore drilling units.

India’s government is pushing for domestic production of oil and gas, with upstream capital expenditure projected to reach US\$100 billion by 2030. Seatrium’s collaboration with Cochin Shipyard positions it well to benefit from this trend, as India’s national oil company, ONGC, has consistently drilled around 480 wells annually over the past five years.

Share Buyback Program

In 2024, Seatrium demonstrated its commitment to shareholder value through an aggressive share buyback program:

• The company spent over S\$43 million repurchasing approximately 25.2 million shares at an average price of around S\$1.72.
• With less than 44% of its authorized buyback amount utilized, further buybacks are anticipated in the lead-up to the 2024 results announcement in late February 2025.

Financial Performance and Forecast

Seatrium’s financial metrics for 2023 and projections for the coming years reveal an improving trajectory:

• Revenue Growth: Revenue is forecasted to rise by 14.4% in 2024 to S\$8,343 million, before tapering off in subsequent years.
• EBITDA Turnaround: The company is expected to post an EBITDA of S\$657 million in 2024, up from a loss of S\$1,116 million in 2023.
• Net Profit Recovery: After a net loss of S\$1,940 million in 2023, Seatrium is projected to achieve a net profit of S\$105 million in 2024, increasing to S\$296 million in 2025.

Valuation and Recommendation

UOB Kay Hian maintains a BUY recommendation for Seatrium with a price target of S\$2.80. This valuation is based on a price-to-book (P/B) ratio of 1.4x, which is one standard deviation above the company’s five-year average. The target price reflects Seatrium’s strong competitive position globally, as many peers have exited the market over the past decade.

The report highlights several catalysts for share price appreciation, including the completion of the MAS/CAD investigations, new orders for renewable energy projects, and potential policy changes in the US that could drive demand for offshore assets.

Conclusion

Seatrium Ltd is poised for significant growth in 2025, backed by a strong orderbook, operational excellence, and strategic partnerships. With a recovering financial outlook and promising opportunities in both the offshore oil and gas and renewables sectors, the company remains an attractive investment option for long-term growth.