Seatrium’s Growth Prospects Shine as Citi Raises Target Price to $2.65
Seatrium’s stock received a bullish endorsement from Citi Research, with the investment bank upgrading its rating from “neutral” to “buy”, citing strong valuation, long-term revenue visibility, and potential resilience from its share buyback program.
Citi analyst Luis Hilado maintained the target price at $2.65, highlighting Seatrium’s $15 billion FPSO contract win for FY2025-FY2029 and its FY2024 project pipeline, which collectively extend revenue visibility through FY2031.
Seatrium’s stock closed flat at $2.10 on March 7, with analysts expecting higher returns and improved margins from new contracts in the coming years.
$15B Contract Boosts Long-Term Outlook
A major factor behind Citi’s upgrade is Seatrium’s substantial $15 billion Floating Production Storage and Offloading (FPSO) contract, which secures a steady revenue stream until at least 2031.
Hilado noted that Seatrium’s acquisition of Keppel Offshore & Marine (Keppel O&M) in February 2023 and the resolution of previous arbitration cases have eliminated key overhangs, making the company a more attractive long-term investment.
Despite these positives, supply chain uncertainties and the learning curve associated with renewable energy projects remain potential risks.
Share Buyback Program: A Key Resilience Factor
Seatrium’s $100 million share buyback program is another reason for Citi’s bullish stance. Only $46.4 million has been utilized year-to-date (YTD), with January 2025 buybacks averaging $2.20 per share.
Hilado suggests that additional buybacks could take place, potentially boosting share prices. Moreover, there’s a strong possibility of Seatrium renewing its share purchase mandate at its upcoming Annual General Meeting (AGM).
Additionally, the cancellation of treasury shares to enhance shareholder returns could be on the cards in 2025, further strengthening the stock’s attractiveness.
Valuation and Price Target Justification
Citi’s $2.65 target price is based on a price-to-book approach, factoring in:
1.2x multiple on FY2026 earnings, as the market is expected to price in Seatrium’s long-term contract growth.
17x FY2025 price-to-earnings (P/E) ratio and 9x enterprise value/EBITDA to account for higher-margin contracts boosting return on equity (ROE).
Hilado also noted that FY2023 write-offs have reduced goodwill impairment risks, providing a clearer financial outlook for the company.
Market Reaction and Future Prospects
While Seatrium’s stock remained flat at $2.10, the potential for further buybacks, improved margins, and a stable long-term contract pipeline make it an appealing option for investors looking for steady growth in the offshore and marine sector.
With a $15 billion contract win, a robust share buyback program, and a stronger balance sheet, Seatrium is well-positioned to capitalize on long-term opportunities in both traditional offshore energy and renewable projects.
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