Seatrium Earnings: Hit by Provision for Contracts and Merger Expenses; Shares Expensive

The first-half 2023 net loss of SGD 264 million for Seatrium was worse than expected, but this was largely due to a provision for contracts and merger expenses of SGD 231 million. Stripping these out, the firm should deliver positive EBITDA of SGD 258 million in first-half 2023 versus negative EBITDA of SGD 19 million a year ago, a commendable result. The firm guided that full-year 2023 will be loss-making. We keep Seatrium’s fair value estimate at SGD 0.12, and we forecast the firm to turn profitable in 2024. However, we think the shares are overvalued currently. We believe upside will need to be driven by significant new order wins and better-than-expected synergies generated from the merger with Keppel Offshore and Marine.