UOB Kay Hian analyst Adrian Loh is keeping his “buy” call on Seatrium after his tour of Seatrium and Golar’s floating liquid natural gas vessel (FLNG) project. Golar is said to be one of the industry’s most innovative developers of floating terminals.
“We recently had the fortune to visit Golar LNG’s newest FLNG vessel Golar Gimi at Seatrium’s (formerly Keppel’s) Benoi yard. The vessel was previously an LNG carrier but through extensive works carried out here in Singapore, it has now been converted into a four-train FLNG vessel capable of processing 2.7mtpa (or million tonnes per annum,” writes Loh.
Noting “positive vibes” from his tour, Loh has also kept Seatrium’s target price unchanged at 19 cents. “Our target P/B multiple of 1.5x is 2 standard deviations (s.d.) above the company’s five-year average of 1.0x and is pegged to its FY2024 book value of 12.5 cents.”
During his tour, key highlights included the presence of “a number of banks”, which shows a high level of interest in financing such energy transition and infrastructure projects, says Loh.
The analyst also noted that industry participants are viewing the LNG landscape as being the key growth area in energy over the next decade.
Third, Seatrium, which places a “very clear emphasis” on its workers’ safety, adds to the company’s overall appeal as a constructor of choice for its multinational clients, says Loh, adding that the Gimi project was completed with 37 million man-hours of work with no lost-time incidents.
Finally, the “immense complexity” of the project, which involved the addition of 1,500k of new cables and 44,000 tonnes of steel to the original LNG vessel, showcased the capabilities of both companies, notes Loh.
On Seatrium itself, the group, which is sitting on a $19.7 billion order book, has a good outlook for new orders.
Seatrium is also poised to win Golar’s third FLNG project should the project meet the former’s “profit margin hurdles”.
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“[Based] on our estimates, [Seatrium’s] Tuas yard has ample capacity from 2026 onwards and a large FLNG project would be a welcome addition to the company’s orderbook,” Loh writes.
“At present, Seatrium has bid for two remaining Petrobras FPSOs (or floating production storage and offloading); however the company was unable to give any guidance on the timeline for this,” he adds. “While 40% of Seatrium’s current orderbook is in the renewable energy space (with the remainder related to oil and gas projects), its addressable market is arguably much larger when taking into account carbon capture usage and storage, floating LNG, and ammonia storage and transport which feeds into the hydrogen energy chain.”
“Our positive view on the stock reflects our belief that the company will benefit from bullish trends in the offshore marine space,” continues Loh.
These trends refer to the tailwinds from the increased construction in the renewables space, as well as the current upcycle in the offshore and marine (O&M) sector.
Risks include higher-than-expected provisions for 2023, negative newsflow regarding its Corrupt Practices Investigation Bureau (CPIB) case, and volatile oil prices, says Loh.
Shares in Seatrium closed flat at 13.8 cents on Sept 13.
