Seatrium (STM SP): Well-positioned To Take Advantage Of Growth Opportunities

UOB Kay Hian | 21 March 2025

Seatrium’s Competitive Position Remains Strong

Seatrium’s competitive position in Brazil remains strong, and the company is well-positioned to take advantage of some of the recent unsuccessful tenders by its competitors. In 2024, Seatrium demonstrated its strong competitive position in Brazil by winning Petrobras’ P-84 and P-85 FPSO newbuilds, as well as the topsides fabrication and/or integration work for the Errea Wittu and Jaguar FPSOs. [[1]]

Petrobras’ challenges in some of its other tenders due to high bid prices, insufficient local content, and limited bidder participation could put Seatrium in a strong position to win more orders in the medium term, given Petrobras’ desire to deploy its substantial exploration and production capex plan of US\$77b over the 2025-29 period. The analyst forecasts US\$6b in new order wins for Seatrium in 2025. [[1]]

Growing Its Maintenance, Repair, and Overhaul (MRO) Business

Seatrium believes that its maintenance, repair, and overhaul (MRO) business has significant upside, given the company’s and Keppel Offshore Marine’s long operating history, which has resulted in two-thirds of the world’s jack-ups being their own designs. The MRO sub-segment is a new initiative for Seatrium, and it is too early for the company to disclose revenue figures. However, the analyst notes that the Repairs and Upgrades (R&U) segment generated S\$1.1b in revenue in 2024, up 7% year-over-year. [[1]]

Robust Interest in Renewables Sector

Seatrium remains optimistic about the renewables sector, with S\$7.9b, or 34%, of its S\$23.2b net orderbook as of the end of 2024 in the renewables and cleaner/green solutions segment. The company stated that despite higher-for-longer interest rates, the level of enquiries remains at a very robust level, and it has a firm belief that order cancellations will not happen. Europe continues to invest in this sector, although the relatively poor state of the grid has presented some hurdles to faster renewables adoption. [[1]]

Ownership of US Yards Seen as Positive

Seatrium operates the Seatrium AmFELS yard in Brownsville, Texas, which focuses on the construction of oil and gas platforms, Jones Act shipbuilding, structural fabrication, and the repair and upgrade of offshore and marine platforms and vessels. The analyst believes that the ownership of this US yard is intrinsically positive, given the current US trade policy under the Trump presidency, which has enacted a US-first trade policy. This could lead to an increase in work at Seatrium’s yard for Jones Act-related shipbuilding and repairs, orders and/or repairs for various types of offshore oil and gas drilling rigs, and infrastructure and dredging-related projects. [[2]]

However, the analyst also acknowledges that there are hurdles to overcome, such as access to skilled labor, with the US labor force preferring the technology sector, and the US’ stricter immigration stance, which could make it harder for shipyards to be competitive. Additionally, a tariff war could increase production costs for Seatrium’s AmFELS yard. [[2]]

Recommendation and Valuation

The analyst maintains a BUY recommendation on Seatrium with an unchanged P/B-based target price of S\$2.96. The target P/B multiple of 1.4x is 1SD above the company’s five-year average and is applied to its 2025 book value of S\$2.04. In the analyst’s view, this P/B multiple appears reasonable considering the company’s strong competitive position globally, as many of its peers have shuttered over the past decade. A key near-term share price catalyst is the completion of the MAS/CAD investigation. [[2]]