Overview of Seatrium Ltd

Seatrium Ltd (STM), a prominent player in Singapore’s offshore and marine sector, continues to demonstrate resilience amidst market fluctuations. The company has shown a sequential improvement in its gross margins and order book, reflecting a steady recovery trajectory. With a current price of S\$2.23 and a target price of S\$2.90, STM is listed as an “Add” recommendation, with a potential upside of 30%.

Key Financial Highlights

• FY24F order wins are estimated at S\$14.4 billion, slightly lower than prior projections of S\$16 billion.
• Notable contracts include BP’s Kaskida Floating Production Unit (FPU) valued at US\$600-700 million.
• Revenue forecasts for FY24F/25F/26F are adjusted to S\$8.5 billion, S\$9.8 billion, and S\$10.8 billion, respectively.
• 2H24F gross margins are expected to improve to 7%, bringing FY24F overall margins to 5.6%.
• Core net profit for FY24F is projected at S\$198 million, with a significant recovery in FY25F and FY26F profits.

Key Projects and Catalysts

STM’s legacy loss-making projects in the US, including the WTIV Charybdis for Dominion Energy and the TSHD for Manson Construction, are nearing completion. The WTIV Charybdis is 93% complete as of November 2024 and is set for deployment in early 2025. The company is also well-positioned to secure new contracts, such as Penta Ocean’s heavy-lift vessel and Petrobras’ P-86 FPSO.

ESG Performance

STM scored a C+ in its ESG rating by LSEG, with strong performance in Social (B+) and Governance (B+). The company has set ambitious targets for 2025, including generating 30% of turnover from sustainable solutions and achieving zero harm to the environment. STM’s commitment to safety and compliance is underscored by its zero-fatality record and ISO 37001 certification.

Peer Comparisons

Seatrium Ltd’s performance was benchmarked against regional and global players in the offshore and marine sector. Below is a detailed analysis of key competitors:

Keppel Ltd

• Recommendation: Add
• Target Price: S\$8.78
• Current Price: S\$6.81
• Market Cap: US\$8,991 million
• P/E Ratios (CY24F/25F/26F): 14.7x, 13.5x, 13.4x
• ROE: 7.7%
• Dividend Yield: 5.0%

Keppel continues to showcase strong fundamentals, with a notable dividend yield and steady P/E ratios. Its strategic focus on integrated global asset management positions it well for future growth.

Capitaland Investment

• Recommendation: Add
• Target Price: S\$4.30
• Current Price: S\$2.48
• Market Cap: US\$9,034 million
• P/E Ratios (CY24F/25F/26F): 17.7x, 13.2x, 12.6x
• ROE: 5.0%
• Dividend Yield: 4.8%

Capitaland Investment is poised for significant growth, with an impressive 77.9% EPS CAGR over the next two years, driven by its diversified asset management portfolio.

Yangzijiang Shipbuilding

• Recommendation: Add
• Target Price: S\$3.62
• Current Price: S\$2.89
• Market Cap: US\$8,346 million
• P/E Ratios (CY24F/25F/26F): 9.8x, 10.1x, 9.7x
• ROE: 27.4%
• Dividend Yield: 3.3%

Yangzijiang Shipbuilding outshines peers with its robust ROE and competitive valuations, making it a standout performer among Chinese shipbuilders.

Korean Shipbuilders

Korean players like Korea Shipbuilding & Offshore, HD Hyundai Mipo, and Samsung Heavy Industries exhibit strong growth potential with impressive EPS CAGRs. Their P/E ratios for CY24F/25F/26F range from 24.2x to 86.1x, reflecting varying degrees of valuation premiums. Samsung Heavy Industries leads with a target price of 16,500 KRW and a market cap of US\$8,140 million.

Other Notable Competitors

Other competitors such as Mitsui E&S, Brookfield Corp, and Sembcorp Industries also present unique strengths. Sembcorp Industries stands out with its 20.3% ROE and a target price of S\$7.32, while Brookfield Corp boasts a strong dividend yield of 8.6%.

Conclusion and Outlook

Seatrium Ltd and its peers demonstrate diverse strengths and growth potentials across the offshore and marine sector. While STM shows promising recovery in its financials and gross margins, competitors like Yangzijiang Shipbuilding and Keppel Ltd remain strong contenders in their respective markets. With strategic contract wins and robust ESG initiatives, STM is well-positioned for sustained growth.