Seatrium back on track with estimated S$2 billion TenneT order: analysts

[SINGAPORE] Analysts were positive on Seatrium ’s latest contract win, stating that the marine engineering company was 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 has lifted the value of Seatrium’s new contract wins in the 2025 financial year past S$4 billion. It is also 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.

“With post-merger orders guided to provide double-digit margins, 2026 to 2027 profitability should be healthy,” said Hilado, adding that it could also provide share-price relief from Seatrium’s ongoing legal tussle with Maersk over a US$475 million order.

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.

Analyst expect more orders in 2026

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 was down to his belief that “the market will look into its long-term prospects as new higher-margin contracts should raise returns further and push return 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 margin improvement realisation.

Lim and Kande stated their belief that Seatrium will be able to secure about S$6 billion of 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 HDVC 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.

They 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”.

The analysts set a higher target price than Hilado at 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 as at 9.11 am on Friday after the news, though they pared some of the gains to be 2.4 per cent up at S$2.13 as at 11.20 am.

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.