Broker: CGS International
Date of Report: May 29, 2025

Seatrium Ltd: Strong Order Book, Margin Expansion, and Strategic Review Signal Upturn for Singapore’s Offshore & Marine Giant

Overview: Seatrium’s Upbeat Outlook Amid Strategic US Review and Margin Recovery

Seatrium Ltd (STM), a leading player in Singapore’s offshore and marine sector, is showing promising signals for investors in 2025. The company is actively reviewing its US strategy and focusing on asset optimization in light of labor cost challenges. With a robust order book and improving margins, Seatrium is well-positioned for growth, despite macroeconomic uncertainties and shifting project timelines.

Key Highlights and Financial Summary

• No cost overruns reported for 1Q25; gross margin (GM) has improved year-on-year, estimated at 8% for FY25F (vs. 3% in FY24).
• Year-to-date (YTD) order wins of approximately S\$700 million, with a total order book at S\$21.3 billion.
• Order win assumptions trimmed to S\$4 billion for FY25F, reflecting a more conservative outlook due to some offshore project FIDs being delayed.
• Expected FY25F earnings per share (EPS) growth of 53% year-on-year, with a target price (TP) of S\$2.80 (current price: S\$2.06), representing a 35.9% upside.
• Key catalysts include margin expansion, and the conclusion of an ongoing investigation by Singaporean authorities.

US Operations Under Strategic Review

Seatrium is re-evaluating its US strategy due to persistent labor cost pressures and a challenging operating environment. The immediate focus remains on delivering two key projects:

• Wind Turbine Installation Vessel (WTIV) for Dominion Energy
• Trailing Suction Hopper Dredger (TSHD) for Manson Construction

While US shipbuilding demand may lean toward defense-related contracts, Seatrium faces a labor shortage challenge as it completes these projects. Notably, management has confirmed no asset impairment is currently necessary.

Order Book and Outlook: Balancing Energy Security and Uncertainty

• YTD order wins: ~S\$700 million (including work on a 5,000-ton Heavy Lift Vessel for Penta Ocean Construction, Japan).
• Current order book: S\$21.29 billion (down from S\$23.2 billion at end-2024).
• MOUs in 1Q25 include bp’s second Floating Production Unit, Tiber (estimated S\$1.0–1.2 billion).
• FY24’s strong S\$14.4 billion order wins were driven by large Petrobras (P84/85) and Tennet HVDC platform contracts.
• Some offshore oil contract FIDs have been delayed amid geopolitical and macro uncertainties. Renewables project bids remain active in Europe and Taiwan.
• No contract cancellations reported, including the Empire Offshore Wind substation (S\$250m), which is on track for 2026 delivery.

Margin Recovery and Revenue Growth Expectations

Gross margin has improved, with management maintaining a forecast of 8% for FY25F, up from 3% in FY24. The improvement is attributed to project execution at double-digit margins, including key contracts such as bp’s FPU and Petrobras P-84/P-85. Revenue for 1Q25 is estimated at S\$2.2 billion, annualizing to S\$4.4 billion for 1H25, which is 10% higher than 1H24.

Peer Comparison: How Seatrium Stacks Up Globally

The report provides a comprehensive peer analysis, comparing Seatrium to regional and global shipbuilders and asset managers. Below is a summary of select competitors and their key financial metrics:

• Seatrium’s expected EPS CAGR (CY25F–CY27F) outpaces many peers at 51.3%.
• Its P/E is higher than regional shipbuilders, reflecting expectations of future margin expansion and earnings growth.

ESG Performance: Building Strength in Sustainability and Governance

Seatrium’s ESG (Environmental, Social, Governance) credentials are robust:

• LSEG ESG Combined Score: C+ (Environmental: B, Social: B+, Governance: B+).
• 2025 ESG targets include 30% of turnover from sustainable products, 100% procurement compliance, above-95% customer satisfaction, zero environmental harm, and full product safety compliance.
• Strong workplace safety record; no workers diagnosed with noise-induced deafness in 2024.
• Successfully completed ISO 37001 Antibribery certification surveillance audit.
• Zero legal actions for anti-competitive behavior or monopolistic practice.
• Environmental achievements include avoidance of 6,235 tCO2e per year, with a target of 15,000 tCO2e by 2025, recognized at the 25th Singapore Environmental Achievement Awards 2024.

Clarity on an ongoing investigation related to Operation Car Wash (by MAS and CAD) is expected to further improve Seatrium’s ESG standing.

By the Numbers: Key Financial and Operational Metrics

• Market capitalization: S\$6,974 million
• Shares outstanding: 3,386 million
• Free float: 64.5%
• Major shareholder: Temasek (35.5%)
• Net gearing improving and forecasted to turn net cash by 2026
• B/V per share (BVPS): S\$2.05 (2023A), S\$2.20 (2027F)
• Operating EBITDA margin improvement from -15.3% (2023A) to 12.5% (2027F)

Risks and Catalysts

• Key upside catalysts: Margin expansion, successful completion of regulatory investigations, and execution of high-margin projects.
• Risks: Potential cost overruns, project cancellations, or material negative findings from ongoing investigations.

Conclusion: Seatrium Set for Growth with Prudent Optimism

Seatrium Ltd stands out in 2025 for its improving margins, strong order book, and strategic focus. The company’s robust financial outlook, expanding ESG leadership, and high-profile projects indicate that Seatrium is well-positioned to deliver significant shareholder value. With a consensus “Buy” rating, a 36% upside to the target price, and a clear path to higher profitability, Seatrium is a key stock to watch in the offshore and marine sector this year.