Seatrium back on track with estimated S$2 billion TenneT order: analysts
The latest contract lifts the total value of its new wins in FY2025 past S$4 billion
[SINGAPORE] Analysts are positive on Seatrium’s latest contract win, saying that the marine engineering company is back on track in terms of its order book.
A consortium comprising Seatrium and GE Vernova on Thursday (Dec 11) announced it had won a contract by European transmission operator TenneT to connect North Sea wind power to Germany’s power grid.
CGS International analysts Lim Siew Khee and Meghana Kande on Friday estimated the contract to be worth S$2 billion. They also expected milestone-based payments and estimated project gross margins to be in the high single digits.
The latest contract lifted the value of Seatrium’s new contract wins in the 2025 financial year past S$4 billion. It is the fourth project won by the consortium under the five-year framework cooperation agreement with TenneT announced in 2023.
Citi Research analyst Luis Hilado on Thursday said this contract and November’s BP contract win have “revived the order win trajectory for Seatrium after a relatively dry first 10 months”.
The company’s order win trajectory has thus likely met or beat consensus expectations, he said. This renewed order-book optimism and the prospect of higher margins will likely drive short-term performance, especially with legacy contracts being completed this financial year.
DBS analyst Ho Pei Hwa concurred, positing that the second major win in two weeks could boost confidence and share price.
The finalisations of the Tiber floating production unit and the TenneT projects “signal a strong uptick in ordering momentum”, she said.
Hilado said: “With post-merger orders guided to provide double-digit margins, 2026 to 2027 profitability should be healthy.” He added that it could also provide share-price relief from Seatrium’s ongoing legal tussle with Maersk over a US$475 million order.
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Ho noted that Seatrium’s share price has “corrected” about 16 per cent from a high of S$2.48 after the unilateral termination of the Maersk contract project and a shrunken order book that implied about a two-year revenue coverage.
The TenneT order could be delivered in 2031, said the CGS International analysts, as commissioning of the high-voltage direct-current (HVDC) BalWin5 grid is planned for 2032.
Analysts expect more orders in 2026
DBS’ Ho projects a recovery from the S$4 billion worth of order wins in 2025 towards an S$8 billion annual wins target. She labelled Seatrium a “top pick” for 2026, reiterating a “buy” call and a target price of S$2.96 on the stock.
“We expect margin expansion from execution of higher-margin contracts and cost savings from streamlining operations,” she said, and suggested that Seatrium divest non-core facilities, including returning the Admiralty yard to the Singapore government.
She added: “The overhang of cost overruns in the US will also be removed with near-delivery of the last vessel and divestment of the AmFels yard.”
Hilado maintained a “buy” call, keeping a target price of S$2.65, implying a 2025 price-to-earnings ratio of 17 times and enterprise value-to-earnings ratio of nine times.
He also noted that FY2023 write-offs have “significantly lessened the risk of goodwill impairments” and applied target multiple of 1.2 times for 2026. This comes from his belief that “the market will look into its long-term prospects, as new higher-margin contracts should raise returns further and push returns on equity higher”.
Still, he warned that the cyclical nature of the offshore and marine business may result in significant earnings volatility. Downside risks flagged were a potential significant slowdown in contract wins, contract cancellations and lower-than-expected margins arising from favourable contract pricing and execution gains.
Meanwhile, he said upside potential could be unlocked by major contract wins by its key existing clients and faster-than-expected realisation of margin improvements.
Lim and Kande said they believe that Seatrium will be able to secure about S$6 billion in new orders in 2026, with potential opportunities likely, including floating production storage and offloading (FPSO) integration or module fabrication work from Japan’s Modec.
The offshore company in September secured a final investment decision for ExxonMobil’s seventh offshore oil development in Guyana, and integration or module construction for two other FPSOs for ExxonMobil via Modec and Dutch offshore energy company SBM Offshore.
“We are also hopeful for more HVDC contracts from the Netherlands, as well as partial work for SBM’s Seap 1 and Seap 2 for (Brazilian energy giant) Petrobras,” said the CGS International analysts.
Ho gave a similar forecast, stating that Seatrium’s potential contract wins include more TenneT HVDC units worth S$2 billion each, as well as Petrobras Seap 1 and 2, worth S$1 billion each.
Orders for production units in Guyana and the Gulf of Mexico or the Middle East, worth S$300 million to S$1 billion each, could also roll in.
The CGS International analysts also reiterated an “add” call for Seatrium, as its profit recovery path “becomes clearer with earnings growth in 2025 to 2027 backed by execution of higher-margin orders”.
They set a target price of S$2.67, based on 1.3 times 2026 forecast price-to-book value ratio, which is a 10 per cent discount to its historical average of 1.5 times.
“A key rerating catalyst is the resolution of Seatrium’s arbitration with Maersk Offshore Wind in relation to the terminated contract for a wind turbine installation vessel,” said Lim and Kande.
Shares of Seatrium rose as much as 4.3 per cent at 9.11 am on Friday after the news, but pared some gains to end the day 2.4 per cent or S$0.05 higher at S$2.13.
In November, Seatrium said that it anticipates sustained demand for oil and gas assets, thanks to rising global energy consumption, especially from data centres and artificial intelligence technologies.
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