The research team at OCBC Investment Research (OIR) has kept its “buy” call on Seatrium after the group announced an order win from Shell and a project cancellation from Empire Offshore Wind LLC.
The contract from Shell is estimated to be in the range of US$300 million ($399.5 million) to US$400 million. The cancelled order accounts for around 1.4% of Seatrium’s net orderbook of $1.7 billion as at September 2023.
The team has not factored in any financial impact from the cancelled contract as minimal work was done, according to Seatrium. “The cancelled order also does not come as a surprise given that risks were also highlighted in the group’s earlier results briefing,” it says in its Jan 5 report.
Meanwhile, the team notes that the recovery in dayrates for jack-ups, semi-subs and drillships – with clean dayrates seen in the latter two at about US$500,000 per day – are positive signs for the industry. It adds that the current rates stem from the tightening supply/demand balance, costly reactivation and new construction economics as well as inflationary pressures.
“With that in mind, operators may choose to lock in rigs earlier for their contracts to secure the right assets at as low a price as possible,” says the team.
Despite the positives, the team sees that the offshore wind industry has been facing challenges in recent times, including project economics from the high interest rates.
See also: Test debug host entity
After updating their estimates for the FY2023 ended Dec 31, 2023, the team’s fair value estimate (or target price) is lowered to 17.5 cents from 18.5 cents previously.
For the FY2023, the OCBC team is expecting Seatrium to report a patmi loss of $15.0 million. It is, however, expecting the group to turnaround to profitability with a patmi estimate of $127 million in FY2024.
“Although FY2023 is expected to be another year of net loss, FY2024 should be a better year for Seatrium as more time would have passed for company integration to take place, and as the group ramps up on projects in its $17.7 billion orderbook,” says the team.
As at 4.52pm, shares in Seatrium are trading flat at 11.3 cents.
