Ending 2023 with c.S$5bn orders
- We estimate Shell’s FPU contract to be in the region of US$300m-400m, bringing STM’s 2023F orders to about S$5bn, lower than our S$7bn target.
- Orderbook should stand around S$18.3bn as of end-2023F.
- We keep our S$7bn 2024F order win forecast, on Petrobras contract for P-84 or P85 FPSO (c.US$3bn), potential HVDC from TenneT (c.S$3bn).
- Catalysts: stronger-than-expected orders, jack-up order from NOC and investor day communication of its strategic review by 1H24F.
- Reiterate Add and TP of S$0.19 on 1.5x CY24F P/BV.
Firmed up repeated FPU order from Shell
? Following its announcement on 28 Aug 2023, Seatrium (STM) has been formally awarded the contract by Shell Offshore (Shell) to provide services to carry out construction work for a Sparta floating production unit (FPU). The contract includes the installation of Shell-furnished equipment.
? The Sparta FPU will be situated in the Garden Banks area of the US Gulf of Mexico, c.275km (171 miles) off the coast of Louisiana. It will feature a single topside bolstered by a four-column, semi-submersible floating hull and is designed to produce 90,000 barrels of oil equivalent per day (boe/d).
2023F order win at c.S$5bn
? We estimate Shell’s FPU contract value to be in the region of US$300m-400m, with an EBIT margin of c.7-8%.
? In early Dec 23, STM’s BrasFELS Brazil yard also clinched a floating production storage and offloading (FPSO) contract from MODEC to fabricate topside modules for the Raia project in Brazil, operated by Equinor. The Raia FPSO will have capacity to process 126,000 barrels of oil per day and 16m cubic meters per day of gas, and have a storage capacity of 2m barrels of crude. Work will commence in 1Q24, according to STM.
? We estimate this MODEC contract to be c.S$150m-S$200m, with an EBIT margin of c.8-10%. These contracts should bring STM’s orderbook to c.S$18.3bn, as of end-2023.
What to expect of STM in 2024F?
? We believe there could be some provisions for legacy projects in 4Q23F as the group has completed its strategic review of business and merger between Keppel Offshore & Marine and Sembcorp Marine.
? Investor communication of this strategic review could be a key catalyst, with market expectations of post-merger cost savings to come. Other catalysts include securing one or two opportunistic orders of jack-up rigs from national oil companies (NOC), as well as turning into profitability by FY24F. Downside risks: order cancellations impacting revenue recognition, and project cost overruns impacting profitability.
? Reiterate Add as STM is the only offshore and marine proxy in ASEAN; we retain our TP of S$0.19, still based on 1.5x CY24F P/BV.
