<News Analysis> Third TenneT contract in the bag
- Concluded the highly-anticipated third contract for TenneT HVDC transmission system, estimated to worth S$1.6-1.8bn
- Confidence booster on prospects of offshore wind and STM’s order momentum
- Remain convicted on STM’s turnaround story; Reiterate BUY; TP S$0.18
What’s New
Seatrium (STM) finally concluded the highly anticipated third TenneT contract for a 2GW HVDC transmissi system. Expected to commence work in Jun-2024, this is part of the contract signed with partner GE and TenneT in Mar-2023. We estimate that STM’s portion of contract value to be around S$1.6-1.8bn, making up c.25% of our new order assumption of S$7bn for 2024. The contract serves as a confidence booster on prospects of offshore wind and STM’s order momentum, after the sharper-than-expected sell-off on STM post profit warning.
Our view
This positive news shall provide some relief, hopefully, marked the bottom of the recent pullback. FY2023 results will be due on Feb 26 (Before mkt). We believe it will remove the overhang of uncertainty over asset write down value and provide more clarity on operating improvement and outlook ahead. Key catalyst would be the other major potential orders that market has been expecting – the P84/85 FPSO contracts from Petrobras, which STM appears to be the only qualified bidder after competitor COOEC’s withdrawal end of last year. The contract is estimated to worth S$4bn each. Reiterate our BUY call and TP S$0.18 (1.5x PB).