Seatrium - DBS Research 2023-09-21: All Stars Are Aligned

• We hosted Seatrium for investor meetings in Hong Kong and came away feeling more convicted and excited about the turnaround of the shipyard group and the upcycle of the Offshore & Marine industry.
• - Read this at SGinvestors.io -
• Reiterate BUY; target price for Seatrium unchanged at S$0.18, based on 1.5x FY24F P/B, in line with peers' median.

Bright outlook for order wins.

• Seatrium (SGX:S51) has secured strong order wins of S$4.3bn in 1H2023, resulting in net orderbook of ~S$20bn (including S$0.7bn of repair & upgrade projects). New wins comprise largely of contracts for two High Voltage Direct Current (HVDC) electrical transmission systems for TenneT, a leading European grid operator, estimated at S$3.3bn and Empire offshore wind farm substation worth ~S$500m.

Enquiry level and order pipeline remain robust.

• - Read this at SGinvestors.io -
• The third TenneT HVDC contract, which we estimate is worth S$1.6-1.8bn, stands a good chance to become effective in 2H. In addition, there is more to come as TenneT, a reputable utility company backed by the Dutch government, has ambitious plans to build 60GW of offshore wind capacities by 2030 (28GW awarded thus far) and 300GW by 2050.
• Seatrium has emerged as a front-runner for Petrobras’ P84 & P85 FPSOs, valued at ~S$4bn each, for the Atapu and Sépia fields, which are the sixth and fifth largest in Brazil. The other bidder is China Offshore Oil Engineering Corporation (COOEC). Seatrium is widely expected to win at least one FPSO order.
• Brazil has accounted for one-third of FPSO awards since 2017. Seatrium has a strong niche in Brazil, being the only shipyard with a track record there, to fulfil the 20-25% local content requirement.

Drilling rig market making a comeback.

• Read more at SGinvestors.io.

Pei Hwa HO DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-09-21 SGinvestors.io

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