UOB Kay Hian Research Report March 21, 2025

Seatrium Poised for Offshore Resurgence: Competitive Edge Drives Growth Across Oil & Gas and Renewables

Seatrium’s Stronghold in Brazil Presents Opportunities Amidst Petrobras Challenges

Seatrium (STM) has demonstrated its formidable competitive position in the Brazilian offshore market, winning major FPSO newbuild contracts from Petrobras in 2024. This success comes as Petrobras has faced hurdles in some of its recent tenders, with high bid prices, insufficient local content, and limited bidder participation. [[1]]
Petrobras’ exploration and production capex plan of US$77 billion over 2025-2029 presents a significant growth opportunity for Seatrium. The company’s strong track record and localized presence position it well to capitalize on these upcoming projects. We forecast Seatrium to secure US$6 billion in new orders in 2025. 1

Diversifying into Lucrative MRO Segment

Seatrium is leveraging its extensive experience and proprietary rig designs to expand into the maintenance, repair, and overhaul (MRO) segment. This recurring, high-margin business is expected to provide a steady stream of revenue, complementing the company’s core newbuild and upgrade activities. [[1]]
While MRO revenue figures are not yet disclosed, the repairs and upgrades (R&U) segment generated S$1.1 billion in revenue in 2024, up 7% year-on-year. Seatrium sees significant upside potential in this business as the global fleet of offshore assets continues to age. 1

Renewables Demand Remains Robust

Seatrium’s renewables and cleaner/green solutions segment accounts for 34% of its S\$23.2 billion net orderbook as of end-2024. Despite higher interest rates, the company remains optimistic about the sector’s prospects, with a robust pipeline of inquiries. Europe’s continued investment in renewable energy is a key driver, though grid infrastructure challenges have presented some hurdles. [[1]]

Navigating the US Market’s Opportunities and Challenges

Seatrium’s ownership of the Brownsville, Texas-based AmFELS yard positions it to potentially benefit from the Trump administration’s “America First” trade policies. This could lead to increased demand for Jones Act-compliant vessels, offshore oil and gas infrastructure, and dredging projects. [[1]]
However, the company acknowledges that access to skilled labor remains a key challenge in the US market, which could hamper its competitiveness. Additionally, stricter immigration policies and potential trade wars could increase production costs at the AmFELS yard. 1

Solid Financials and Attractive Valuation

Seatrium’s financial projections show strong revenue growth and improving profitability. The company targets revenue of S\$10-12 billion and EBITDA of at least S\$1 billion by 2028. [[2]]
Our analysis maintains a BUY recommendation with an unchanged target price of S$2.96, based on a P/B multiple of 1.4x applied to the company’s 2025 book value of S$2.04 per share. This valuation reflects Seatrium’s global leadership position and the positive industry dynamics it is poised to capitalize on. 2
Key near-term catalysts include the conclusion of the MAS/CAD investigation and the potential for new orders in the offshore oil and gas, renewables, and commercial vessel repair segments. 2