Seatrium - CGS-CIMB Research 2024-01-30: Toning Down Our Profit Expectations

• Post-completion of a strategic review of its operations, Seatrium announced on 30 Jan that it plans to write down surplus non-core assets and inventories. While it anticipates operational and financial performance to continue to improve, Seatrium expects FY23F net loss to be significantly higher than FY22. See earnings calendar.
• - Read this at SGinvestors.io -

We expect ~S$250m of write-downs in 2H23F

• Recall that in 1H23, Seatrium provided S$231m for merger expenses and higher labour and contract costs for projects in its US yard. For 2H23F, we have now penned in S$250m for the potential closure of fully depreciated yards (such as Crescent, Benoi and Tuas), inventory and PPA impairment, as well as cost overrun provisions.
• - Read this at SGinvestors.io -

Toning down our expectation on margin

• We now expect gross margins of 5.5%/10% for Seatrium in FY24F/25F (previously 8.0%/13%).
• We understand that projects clinched post-merger, including Tennet HVDCs, as well as Petrobras projects awarded pre-merger (P78, P80, P82 and P83), were contracted on double-digit gross margins. However, contracts secured by Seatrium and Keppel Offshore and Marine pre-COVID may still face tail-end challenges, including higher labour and supply chain costs not previously factored in, resulting in gross losses.

Toning down expectation on recovery pace too

• Read more at SGinvestors.io.

LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2024-01-30 SGinvestors.io

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