CGS-CIMB's Lim Siew Khee has maintained her bullish "add" call and 19 cents target price for Seatrium ahead of its 1HFY2023 earnings report on July 28.
While Lim expects the company to still be in the red with an expected net loss of $45 million, she believes Seatrium is well poised to capture further major contracts.
Specifically, Brazil's Petrobras has two contracts up for bid: P84 and P85, with a contract value of some US$3 billion each.
If Petrobras does not amend the bidding rule, no single yard to be awarded both contracts. Seatrium, Lim believes, can win at least one of the units, adding to the haul of four of the five contracts awarded by Brazil's national oil company to Seatrium since 2021.
Lim, citing channel checks, says that key competitors, Korea's Hanwa Oceana and Hyundai Heavy Industries have scant yard capacity as they are busy fulfilling better-margin LNG vessel orders.
Another competitor, Italy's Saipem, which won one of the earlier contracts awarded in 2021, is not planning to compete for P84 and P85, says Lim, citing a report from industry publication Upstream.
Seatrium, which has already built up an order book of more than $20 billion, might secure another $7 billion in the coming FY2024, estimates Lim.
For the coming 1HFY2023 results announcement by Seatrium, Lim will be looking out for upside potential to her revenue forecasts as a combined yard, and also the segmental breakdown of orders.
Lim's 19 cents target price is still based on 1.5x FY2023 P/BV (average trading range from Jan 15 to May 23).
See also: RHB still upbeat on ST Engineering but trims target price by 2.3%
Possible re-rating catalysts include settlement of Brazilian proceedings, stronger-than-expected order wins, newbuild rig orders.
On the other hand, downside risks include cost overrun in projects delaying turnaround in profits.
Seatrium shares, a persistently top volume counter for months, changed hands at 13.1 cents as at 10.46am, up 0.77%.
