Seatrium (SGX:S51) won over S$5.3bn new contacts year-to-date, based on our estimates, making up 88% of our full year assumption of S$6bn, ahead of expectations. This lifts the orderbook to ~S$20bn (39% renewable/cleaner energy solutions), providing good revenue visibility for the next 3 years.
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Management remains tight-lipped about margin assumption and guidance though they are optimistic on a turnaround given the higher activity level, integration synergies and favourable industry momentum.
Seatrium has reviews all its projects. If executed well, they should accrete positively to the bottomline. Projects are assessed based on return and risks, not on a fixed margin.
Possibly double-digit margins and ROE?
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In our forecast period, we project revenue to grow from S$5.4bn towards S$8.2bn by FY25F with net margin recovering from a small deficit to 6.8% by FY25F, achieving ROE of ~6.6%. There could be upside to our assumptions on both revenue and margins, in the event of better-than-expect contract wins and project execution.
Seatrium could resume dividend payout post earnings turnaround, paying out 30-40% earnings, in our view. This translates to 1-3% dividend yield based on our FY23-24F earnings.
Order outlook is greener and rosier than ever. Seatrium has room for more orders...
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Above is an excerpt from a report by DBS Group Research. Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.
