Analysts from DBS Group Research and CGS International Research have kept their positive view on Seatrium after it won the "highly anticipated" third contract from TenneT.
As announced by Seatrium on Feb 19, it is helping to build a 2GW transmission system together with GE Vernova for the customer, which operates transmission systems in the Netherlands and Germany.
DBS estimates Seatrium's portion of the contract to be valued at $1.6 to $1.8 billion, which makes up a quarter of the brokerage's new order assumption of $7 billion for the current FY2024.
The way DBS sees it, the contract serves as a "confidence booster" on prospects of offshore wind and Seatrium's order momentum, as well as some "relief" after the sharper-than-expected sell-off on its recent profit warning.
From a recent peak of 15 cents last September, Seatrium's share price has dropped to as low as 8.5 cents earlier this month.
DBS hopes that this new contract win will help mark the bottom of the recent pullback and remove the overhang of uncertainty over asset write-down value and provide more clarity on operating improvement and outlook ahead when Seatrium reports its full-year numbers on Feb 26.
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DBS, which has kept its "buy" call and 18 cents target price, believes that another key catalyst would be the other major potential orders that the market has been expecting, specifically the P84 and P85 oil rig contracts from Petrobras worth around $4 billion each.
Several trade publications had earlier reported that Seatrium is the only qualified bidder remaining after a China-based competitor dropped out late last year as it cannot meet local component requirements. Seatrium, in contrast, operates its own yard in Brazil.
Separately, Lim Siew Khee of CGS International has kept her FY2024 new order assumption of $7 billion following news of the contract win.
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In her Feb 19 note, Lim says Seatrium has a "good chance" of winning either one, or both of the P84 and P85 contracts.
She has kept her "add" call and target price at 16.4 cents, which is based on 1.4x price to book, which is in line with the company's average trading range between Jan 15 and Dec 2023.
Key rating catalysts include further updates from Seatrium's strategic review when it holds its investor day, as well as potential opportunistic wins of jack-up rig orders, and
a turnaround in profitability for the current FY.
On the other hand, downside risks include order cancellations impacting revenue recognition and project cost overruns affecting profitability.
