Seatrium: Poised for Growth in the Offshore and Renewable Energy Sectors
UOB Kay Hian Research Report – 21 March 2025
Seatrium’s Competitive Advantage in Brazil
Seatrium (STM SP) has demonstrated its strong competitive position in Brazil, winning several key contracts from Petrobras in 2024. These include the P-84 and P-85 FPSO newbuilds, as well as topsides fabrication and/or integration work for the Errea Wittu and Jaguar FPSOs. This success comes amidst Petrobras’ challenges in other tenders, such as high bid prices, insufficient local content, and limited bidder participation. Seatrium’s position puts it in a strong place to win more orders in the medium term, as Petrobras looks to deploy its substantial US\$77 billion exploration and production capex plan for 2025-2029. UOB Kay Hian forecasts US\$6 billion in new order wins for Seatrium in 2025.
Expanding the Maintenance, Repair and Overhaul (MRO) Business
Given Seatrium’s and Keppel Offshore Marine’s long operating history, with two-thirds of the world’s jack-ups being their own designs, the company believes its MRO business has significant upside potential. This recurring revenue, lower-volatility segment is critical for maintaining the safety, compliance, and operational reliability of offshore rigs, FPSOs, drillships and support vessels. While still a new initiative, the R&U segment generated S\$1.1 billion in revenue in 2024, up 7% year-on-year.
Continued Optimism in Renewables
Seatrium remains optimistic about the renewables sector, with 34% of its S\$23.2 billion net orderbook as of end-2024 in renewables and cleaner/green solutions. Despite higher interest rates, management states that the level of enquiries remains robust, and they do not expect order cancellations. Europe continues to invest heavily in this space, though grid infrastructure challenges have presented some hurdles.
Opportunities and Risks in the U.S. Market
Seatrium’s ownership of the Brownsville, Texas-based AmFELS yard is a positive, given the Trump administration’s “America First” trade policies. This could lead to increased work in areas like Jones Act-related shipbuilding and repairs, offshore oil and gas projects, and infrastructure/dredging initiatives. However, access to skilled labor and potential trade wars pose challenges that Seatrium will need to navigate.
Financial Outlook and Valuation
UOB Kay Hian maintains a BUY recommendation on Seatrium, with an unchanged target price of S\$2.96. This target P/B multiple of 1.5x, which is 1.5 standard deviations above the company’s 5-year average, is seen as reasonable given Seatrium’s strong global competitive position, increasing revenue visibility, and potential for more order wins in 2025. A key near-term catalyst is the completion of the MAS/CAD investigation.
