Seatrium’s sharp surge in share price on July 12 on a significant expansion in volume may have been in anticipation of a contract win. According to analysts and oil and gas media, Petrobras, Brazil’s national oil company, has a couple of large contracts up for grabs. These include P84 and P85 with a contract size of US$3 billion ($4 billion) each.
CGS-CIMB has suggested that Seatrium could win at least one of the contracts and has a price target of 19 cents for the stock. Technically, resistance appears at 15.2 cents and Seatrium may need significantly higher volume to trigger a break above this level.
Its 1HFY2023 ended June results are likely to be announced on July 28 and the street’s estimates are for a continued net loss.
Ironically, on June 1, Seatrium announced that the Corrupt Practices Investigation Bureau (CPIB) released a statement stating that it has started investigations against the company and individuals from the company on alleged corrupt offences that occurred in Brazil. Seatrium says the investigations relate to events that occurred before 2015.
Before 2015, Sembcorp Marine (SCM) and Keppel Offshore & Marine (KOM) had multi-billion-dollar contracts with Sete Brasil to build drillships and offshore rigs which were eventually to be used by Petrobras. Sete Brasil filed for bankruptcy protection in 2016 following a corruption scandal. In February, SCM and KOM completed a merger to form Seatrium. “The company believes that this relates to events that occurred before 2015 and to the Sembcorp Marine group in existence at that time. Those events predate the merger with Keppel Offshore & Marine which only took place in February 2023,” says Seatrium in its June 1 statement.
In June, Yangzijiang Shipbuilding (YZJ) announced a swathe of contract wins. These include a contract from Norway-based Klaveness Combination Carriers ASA for the construction of three 83,300dwt third-generation CABU vessels, due to be delivered in 2026.
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Separately, YZJ announced a contract to build six dual-fuel containerships from AP Moller-Maersk for delivery between 2026 and 2027. The shipbuilder also announced new orders for a further 37 vessels. Altogether, YZJ managed to secure new orders for 69 vessels worth approximately US$5.6 billion this year, boasting this is its “highest ever total outstanding order book value of US$14.60 billion for 180 vessels”.
YZJ’s share price has been on a rising trend since the start of the year, gaining around 18%. While short-term indicators are on the high side, they are not excessively overbought. The stock has just broken out of an ascending triangle at $1.50. If prices can stay above this level by July 17, the breakout is likely to be confirmed and the stock would be able to resume its uptrend.
By contrast, the banks had been floundering. Of the three, DBS Group Holdings appears most likely to gain strength in the near term as prices have bounced off the bottom of a base formation. Resistance appears at the twice-tested $31.80 level. Since May 10, when DBS fell below this level, it has acted as resistance. A breakout is needed to trigger a recovery.
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United Overseas Bank had broken below the twice-tested support of $27.50 earlier in July. However, it has regained this level but may still need to build a minor base for more strength to return.
