Date of Report: 3 October 2024
Broker: UOB Kay Hian
Strategic Presence in Brazil
Seatrium (STM) is recognized for its long-term operational presence in Brazil, which is viewed as a significant competitive advantage. This two-decade experience positions the company favorably in both the oil and gas sector and the renewable energy market.
Growth Opportunities in Oil and Gas
The company is poised to benefit from upcoming projects offshore Brazil, particularly as Petrobras, the Brazilian state-owned oil company, has announced plans for up to seven new Floating Production Storage and Offloading (FPSO) units in addition to the eleven already on order. Seatrium is currently constructing six of these FPSOs.
Market Dynamics and Strategy
Industry reports indicate that Petrobras is reassessing its strategy following a lack of positive responses to its four FPSO tenders in 2024. This situation could open avenues for Seatrium to secure new construction contracts, with estimates for these eleven contracts ranging between US$20 billion to US$30 billion.
Renewable Energy Growth Potential
Seatrium is also positioned to capitalize on the emerging market for offshore renewable energy in Brazil. The country currently has no offshore wind installations but has plans to install 700 GW of capacity over an undetermined timeframe. Petrobras has outlined its own offshore wind projects, totaling 23 GW, alongside 14.4 GW in partnership with Norway’s national oil company, Equinor.
Investment Recommendation and Target Price
UOB Kay Hian maintains a “BUY” recommendation for Seatrium, with a target price set at S$2.31. This valuation is based on a price-to-book (P/B) multiple of 1.15x, which is pegged to the company’s five-year average and applied to its 2025 book value of S$2.01.
Key Catalysts for Share Price Growth
Key events that could positively impact Seatrium’s share price include:
- Acquisition of new orders for oil and gas production assets.
- Expansion into renewable infrastructure projects.
- Resolution of ongoing investigations by the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD), which could alleviate any overhang affecting the stock.
