Seatrium Earnings Preview: High Expectations Following S$11 Billion Deal Surge

On Monday, Seatrium's stock price surged up to 15% following the announcement of new contracts worth S$11 billion, marking the largest single-day gain in nearly two years (since March 2022). The stock closed the day with an 11.69% increase in share price, settling at S$1.720.

According to SGX, Seatrium is set to release its earnings results for Q1 FY2024 (period ending 2024-03-31) on May 28, 2024. Since March, 9 analysts have given their rating for Seatrium, with an average target price of 2.728 SGD. Of the 9 analysts, 6 have given a buy recommendation, 1 has given an overweight/attractive rating, 1 has given an add rating, and 1 has given an outperform rating.

As Seatrium gears up to release its Q1 FY2024 financial results, investors should focus on High-Value project wins and net order book growth. Additionally, investors should also pay attention to Renewables and Clean Energy Focus, LNG Fleet Modification Project, and EPCC Contracts for Offshore Substations. These key developments are expected to prominently influence Seatrium's revenue trajectory and underscore its commitment to growth in renewable energy infrastructure and cleaner maritime solutions.

According to a note from Citi Research analyst Luis Hilado, Seatrium's recent contract win from Petrobras for two new floating production storage and offloading vessels could provide long-term revenue visibility. The construction of the vessels is expected to take place between Q12025 and 2029.

Citi Research considers Seatrium's contract win a "positive surprise" and has increased its 2024 order-book win assumption from S$9 billion to S$15 billion. The research firm believes that previous issues such as impairments and arbitration that impacted the stock price are now priced in.As a result, Citi upgraded Seatrium's stock from sell to buy and raised the target price to S$2.16 from S$1.96.

Seatrium's recent corporate actions, including a 20-to-1 share consolidation, a S$100m share buyback program, and the early redemption of S$500m worth of floating rate bonds, have sent a positive signal to the market, according to OCBC Investment Research. The company's steady order wins year-to-date, such as repair and upgrade contracts worth S$350m and a floating production storage and offloading topsides integration contract from MODEC, also contribute to a positive outlook for Seatrium.

OCBC Investment Research has revised its fair value estimate for Seatrium from S$0.155 to S$2.73 to account for the share consolidation, while leaving the rest of its forecasts intact. The fair value estimate is pegged to a forward price-to-book multiple of 1.3x, which is around a quarter of a standard deviation above its 10-year historical average of 1.2x.

UOB Kay Hian maintains a positive view on Seatrium for its exposure to stronger demand from the offshore oil & gas and renewables industry, despite the potential volatility in its share price in the next two weeks after its 20-for-1 share consolidation. The majority of Singapore's small to mid-cap offshore marine companies have outperformed in the past 12 months, with Mermaid Maritime and ASL Marine being bullish about their respective business outlooks over the next 12-24 months. As a result, UOB Kay Hian maintained Seatrium's stock to BUY and provided the target price of S$3.02.