Since its proposed name change in April 2023, Seatrium, formerly known as Sembcorp Marine (SembMarine), has been trying to keep its announcements positive and give its share price a lift.
However, this effort has been marred by occasional news of its involvement with Operation Car Wash, an anti-corruption probe launched by the Brazilian authorities in 2014. The latest announcement was made on June 15, when the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) requested further information from Seatrium regarding the probe. MAS and CAD were conducting joint investigations into offences potentially committed by the company.
The Corrupt Practices Investigation Bureau (CPIB) began investigating Seatrium in May 2023 for alleged corruption offences in Brazil.
Not all is lost, with Seatrium’s steady spate of contract wins in the offshore and marine (O&M) space and the offshore wind sector.
On March 15, Seatrium announced several targets, including its aim to grow its ebitda by fourfold to more than $1 billion by FY2028. The group’s ebitda came in at just $236 million for the FY2023 ended Dec 31, 2023. The group also seeks to deliver a return on equity (ROE) of over 8% by the same period, as well as a Net debt/Ebitda of two to three times and gross margins across all segments in the mid-teens.
In addition, the group aims to deliver a revenue target of between $10 billion and $12 billion by FY2028, which will come from a more diversified and resilient portfolio mix of oil and gas, renewables, repairs and upgrades, and carbon capture and storage (CCS) and new energy projects.
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Despite the targets, market reaction was muted, with the stock sold down by 14.13% on March 20.
Since the collapse of oil prices in the second half of 2014, the upstream oil and gas industry has faced weak prices and cuts in capital expenditures (capex). SembMarine reported a $289.7 million loss in FY2015 before recovering to profitability in FY2016 and FY2017. While FY2017 saw SembMarine remaining in the black, its earnings fell by 82.1% y-o-y to just $14.1 million due to lower revenue recognition for rigs and floaters and offshore platform projects. From FY2018 onwards, the group has reported full-year losses. Under listing rules, SembMarine has had to issue notices of three straight years of losses since April 2020. The latest notice was given on April 9, after the name change.
Shares in the group have remained at all-time lows since. Since the start of the year, shares in Seatrium are trading 36.75% lower. As at July 17, Seatrium’s shares closed at $1.48. Before its proposed 20-to-1 share consolidation on April 29, Seatrium’s shares would have closed at 7.4 cents, marking a far cry from its peak of $3.36 per share (or $67.16) as at the close of April 8, 2011, according to Bloomberg data.
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However, analysts remain upbeat about Seatrium’s prospects.
On June 28, UOB Kay Hian analyst Adrian Loh kept his “buy” call but with a lower target price of $2.35 from $3.23, as he believes the new investigation by MAS and CAD into Operation Car Wash has capped any share price upside in the near term.
On June 18, Citi Research analyst Luis Hilado similarly lowered his target price to $1.96 from $2.16 after the new investigations.
“To factor in the potential risk, we have adopted a one times price-to-book (versus 1.1 times previously),” he wrote while keeping his “buy” call.
DBS Group Research also kept its “buy” call with an unchanged target price of $3 after Seatrium’s revenue for the 1QFY2024 was “on track”. The team also noted a “robust order outlook”, calling the pullback in share price from the MSCI deletion a “buying opportunity”.
CGS International analyst Lim Siew Khee also kept her “add” call with a pre-consolidated target price of 14 cents after Seatrium’s latest win from its long-time customer Modec.
Temasek became a direct shareholder of SembMarine in 2020 after its split from parent company Sembcorp Industries U96 . The Singapore state-owned investor invested a further $1.1 billion in the group through its rights issue in 2020 and its rights issue and mandatory general offer in 2021, bringing its total stake to 54.6% at that time.
On Feb 29, Temasek-linked Fullerton Fund Management Company sold 56.5 million shares via the market for $4.96 million or 8.77 cents apiece. The sale pared Temasek’s total stake down to 37.95%.
According to Bloomberg data, as of March 11, Temasek had a 35.55% stake in Seatrium. The Vanguard Group is the second-largest shareholder in Seatrium, with a 2.19% stake. Norway’s central bank, Norges Bank, is the third-largest, with a 1.19% stake.
