Seatrium: Opportunities and Challenges in Deepwater Projects
Seatrium, currently trading at \$2.55 and boasting a market capitalization of S\$8.7 billion, has announced the signing of a Memorandum of Understanding (MOU) with BP Exploration & Production Inc. (bp). This MOU sets the stage for the Tiber Floating Production Unit (FPU) project in the US Gulf of America, following their successful collaboration on the Kaskida FPU project.
The Tiber FPU project will involve engineering, procurement, construction, and commissioning (EPCC) services. It is designed to enhance operational efficiency and safety while supporting BP’s deepwater assets. Both parties will define the initial scope of work, with a final investment decision expected in 2025.
Seatrium’s advanced topsides single lift integration methodology will be leveraged for the Tiber project, drawing from the lessons learned in the Kaskida FPU. However, despite strong order momentum and share buybacks, Seatrium faces challenges, including low profitability and an ongoing corruption probe related to “Operation Car Wash” by Singaporean authorities. At a forward price-to-earnings ratio of 55.4x and price-to-book ratio of 1.37x, the company’s valuation appears fair. The recommendation remains a “HOLD.”
Civmec: Strong Portfolio Yet Facing Near-Term Challenges
Civmec, trading at S\$1.05 and capitalized at S\$533 million, reported a 17% year-on-year decline in net profit for the first half of FY2025, amounting to A\$26.5 million. This was below market expectations due to weaker margins, with EBITDA margin falling 1.6 percentage points and net margin dropping 1.2 percentage points. Despite maintaining interim dividends of 2.5 Australian cents, the outlook remains cautious.
Project delays and rescheduling may lead to reduced activity in the second half of FY2025 and potentially into the first half of FY2026. Consequently, profit forecasts for the fiscal year ending June 2025 have been revised down to A\$48 million, 17% below consensus estimates. The recommendation for Civmec has been downgraded to “SELL,” with expected support around S\$0.83, where the dividend yield is approximately 6%.
Operational highlights include the successful completion of the Boorloo Bridge, a landmark project showcasing Civmec’s capabilities in architectural and engineering design, steel fabrication, and in-river works. The company also achieved higher accreditation levels for bridge building and won the Australian Steel Institute National Steel Excellence Award for its Shiploader and Berth Replacement Project.
Looking ahead, Civmec is making progress in its due diligence for acquiring Luerssen Australia Pty Ltd, responsible for building six Arafura Class Offshore Patrol vessels for the Royal Australian Navy. A Service Level Agreement has been signed to enhance program efficiency. Despite strong tendering activities, the market conditions pose uncertainties for the near term.
Macro Market News: US, Hong Kong, and China
In the US, the launch of DeepSeek has created competitive pressures for companies like Nvidia and hyperscalers, raising concerns about demand for expensive AI chips. While this negatively impacts hardware makers and AI developers, software companies using AI applications stand to benefit. Analysts suggest investors adopt a defensive asset allocation, underweighting equities and credit in richly valued sectors.
In China and Hong Kong, domestic tourism saw a boost during the extended Chinese New Year holiday. Tourism revenue rose 7% year-on-year to 677 billion yuan, with notable increases in trip numbers and per capita spending. Popular destinations included cultural and heritage sites. However, overseas travel remains below pre-pandemic levels, with Asian countries like Japan and Thailand being preferred destinations. This shift underscores the lingering effects of COVID-19 on global travel patterns.
Fund Flow Insights: Institutional and Retail Trends
Institutional investors recorded net sales of S\$130.6 million in the week of February 3, 2025, while retail investors net bought S\$256.6 million during the same period. Key institutional net buy stocks included SGX (S\$68.8 million) and Singtel (S\$23.0 million), whereas DBS (-S\$51.6 million) and OCBC (-S\$29.1 million) saw significant net sales. Retail investors favored DBS (S\$94.3 million) and OCBC (S\$46.3 million) while selling SGX (-S\$73.2 million) and ST Engineering (-S\$16.0 million).
Dividend Announcements
Several companies have announced dividends, including DBS Group Holdings with a final dividend of 60 cents payable on April 16, 2025, and Keppel Ltd with a final dividend of 19 cents payable on May 9, 2025. Civmec declared an interim dividend of AUD 2.5 cents, payable on April 11, 2025.
SGX Watch-List and Upcoming Events
32 companies remain on the SGX Watch-List, with recent additions including Addvalue Technologies, Renaissance United, and Telechoice. Upcoming corporate earnings reports and events in February 2025 include Keppel Ltd, DBS, and OCBC, among others.
