Company Reports

While Seatrium’s first-half 2024 net profit of SGD 36 million is a positive compared with net loss of SGD 264 million a year ago, this is below our expectation due to one-off items such as provisions for onerous contracts and the settlement with MH Wirth. Net interest expense is also higher than expected, as the firm has raised borrowings to support working capital for its rising order book. We have pushed back our margin recovery assumptions for Seatrium and cut our 2024-26 earnings forecasts by 28-37%. Consequently, we reduce our fair value estimate to SGD 2.66 from SGD 3.00. The magnitude of the cut is less than the near-term earnings revisions, as our long-term estimate remains largely unchanged, with 2028 net profit only lowered by 2%. We think Seatrium remains undervalued, with more than 50% upside. We believe the outlook for the offshore industry remains positive and investors should accumulate the shares to take advantage of the near-term share price weakness. The ongoing share buyback program should also provide support to its share price. The new Singapore regulatory investigation, started in June regarding Operation Car Wash in Brazil, is still underway. We have not factored in additional provisions.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

We raise no-moat Seatrium’s fair value estimate to SGD 3.00 per share from SGD 2.40 after incorporating the new order wins from Petrobras. This reaffirms our view that Seatrium is undervalued currently, with upside to be driven by significant new order wins. We also think its share price should be supported by the ongoing share buyback program.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

We adjust Seatrium’s fair value estimate to SGD 2.40 per share from SGD 0.12 to account for the 20-for-1 consolidation of its shares. Our view on Seatrium is unchanged. The shares are currently undervalued, with upside to be driven by significant new-order wins.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

No-moat Seatrium held its investor day on March 15. Following our review of management’s comments, we keep our earnings forecasts and fair value estimate at SGD 0.12 per share. We think Seatrium is undervalued currently, with upside to be driven by significant new-order wins. The firm also said it would focus on increasing shareholder returns through dividends and share buybacks.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

Seatrium's 2023 net loss widened to SGD 1.94 billion from a net loss of SGD 261 million in 2022, largely due to noncash write-downs, provisions for contracts, legal and corporate claims, and merger expenses. We see the net loss as well-guided by management, and we believe investors should focus on the positive outlook ahead. We expect Seatrium to be profitable in 2024 on the back of improved activities, increased efficiency, and the absence of significant one-off items. We therefore keep our fair value estimate at SGD 0.12, and we think Seatrium is attractive currently, with upside to be driven by significant new-order wins. Management will share more information on the outcome of the firm's strategic review on March 15, Seatrium's inaugural Investor Day.

Following a strategic review of its current business, no-moat Seatrium forecasts that its 2023 net loss is expected to be significantly higher than 2022’s net loss due to a material noncash write-down on surplus noncore assets, including excess and obsolete inventories. We keep our fair value estimate of SGD 0.12 and earnings estimates unchanged, pending the release of Seatrium’s final results in late February 2024. We have already forecast a 2023 net loss of SGD 438 million versus a net loss of SGD 261 million in 2022. We expect Seatrium to turn profitable in 2024 on the back of a recovery in its net order book. In our view, Seatrium is currently fairly valued, and new order wins will be key to driving its future share price performance.

We keep Seatrium’s fair value estimate at SGD 0.12 following its in-line third-quarter business update. Following the recent correction, we think Seatrium is currently fairly valued. The firm continues to guide for a loss-making 2023, with first-half results affected by provision for contracts and merger expenses. We forecast Seatrium to turn profitable in 2024 and our near-term earnings estimates are unchanged. We believe significant new order wins will help to drive share price performance.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

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.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

Seatrium, formerly known as Sembcorp Marine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

We keep Seatrium’s (formerly Sembcorp Marine) fair value estimate at SGD 0.12 following its first-quarter 2023 business update. We think the firm is fairly valued currently, and 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 &Marine.

Sembcorp Marine’s, or Sembmarine’s, 2022 net loss of SGD 261 million, a significant improvement from a net loss of SGD 1.17 billion in 2021, was within our expectations. We believe the net loss is well guided by management and that investors will focus on the positive outlook ahead, following completion of the merger with Keppel Offshore & Marine. We expect Sembmarine to be largely break-even in 2023 before posting a higher net profit of SGD 374 million in 2024, on the back of improved activities and larger order book. However, we keep our fair value estimate at SGD 0.12 as the higher earnings derived from the merger are offset by a 117% increase in the share base. We think Sembmarine is fairly valued currently, and we believe upside will need to be driven by significant new order wins and better-than-expected synergies generated from the merger.

Sembcorp Marine, or Sembmarine, has several shipyards in Singapore together with a network of overseas yards. Their strategic locations provide strong coverage in key growth markets, including Brazil and Southeast Asia. These yards have capabilities ranging from simple repair and upgrades to complex module configuration and rig building.

We are placing Sembcorp Marine under review pending the completion of the proposed combination between Sembcorp Marine and Keppel Offshore & Marine, which is expected to be completed by Feb. 28, 2023. We will provide further updates following the event.

We keep Keppel’s fair value estimate at SGD 9.40 following its in-line 2022 results. We believe Keppel is attractive now, underpinned by its diversified business while its Vision 2030 strategy will continue to unlock value of its assets. Sembcorp Marine, or Sembmarine, will hold an extraordinary general meeting on Feb. 16, 2023, to vote on its proposed combination with Keppel Offshore and Marine, or Keppel O&M, and we expect the deal to be approved by shareholders. Hence, we move Sembmarine’s Morningstar Uncertainty Rating to High from Very High, as we think the combined entity will enhance Sembmarine’s future earnings given the larger scale and stronger order book. Sembmarine expects the transaction to be completed by Feb. 28, 2023, while Keppel will distribute 19.1 Sembmarine shares to its shareholders for every one Keppel share they hold subsequently.