Can Seatrium build on its robust H1 earnings? UOBKH and DBS analysts have divided views

[SINGAPORE] Seatrium reported a strong turnaround for its first half ended Jun 30 on the back of higher-margin projects, productivity improvements that lowered costs, and asset divestment gains.

But analysts are divided on whether the group can sustain the sterling performance in the absence of major near-term contract wins.

For H1 2026, Seatrium’s net profit jumped 158 per cent year on year to S$372 million, boosted by a S$172 million gain from the sale of non-core assets. Stripping out one-offs, core net profit rose 54 per cent year on year to S$212 million.

Despite this, UOB Kay Hian (UOBKH) downgraded Seatrium to “hold” from “buy” and lowered its target price from S$3.15 to S$2.30 in a note on Monday (Aug 3). The counter closed at S$2.21 on Tuesday.

Contract win momentum needed

Analyst Roy Chen said a quieter H1 on the order front shrank the group’s net order book to S$13.3 billion, down from S$17.8 billion six months prior.

“The pace of order wins in H2 2026 is more important than just good earnings, as the current S$13.3 billion net order book does not provide good revenue visibility beyond one year,” he noted.

He added that Seatrium “urgently needs some sizeable order wins in the next six months to sustain investor confidence”, pointing to Petrobras’ P-88 floating production, storage and offloading (FPSO) tender as a crucial near-term catalyst.

“Despite the H1 2026 results beat and the likely even stronger H2 2026 core earnings, we downgrade Seatrium to ‘hold’ in a cautious move, due to poor revenue visibility beyond 2026,” he said.

DBS, on the other hand, maintained its “buy” call with a target price of S$3.

While it acknowledged that “the next key catalyst to re-rate the stock hinges on contract win momentum”, it also noted that the order pipeline has grown to over S$32 billion as at end-June, from S$28 billion in May.

“Besides the highly anticipated Petrobras’ FPSOs (around S$4 billion each) likely towards year-end and Tennet’s high-voltage direct current converter station (around S$2 billion each), Seatrium is also seeing higher enquiries for gas-related projects (floating liquefied natural gas, et cetera) and production-related platforms in Africa/Middle East regions,” DBS analyst Ho Pei Hwa said.

CGS International also reaffirmed its “add” rating with a S$2.52 target price.

Analysts Meghana Kande and Lim Siew Khee expect order wins to be back-ended in H2 2026, citing strong demand for gas-related conversions and newbuilds.

“Sizeable order contracts of at least S$1 billion are a key re-rating catalyst for Seatrium, along with stronger-than-expected gross profit margin expansion. We maintain our ‘add’ call on Seatrium to benefit from buoyant offshore activity globally,” CGS analysts said.

Morningstar raised its fair value estimate by 4 per cent to S$2.90, maintaining that Seatrium shares remain undervalued. It views its S$4.4 billion to S$8.5 billion annual order win trajectory through 2030 as fully achievable given tailwinds from energy security and the green transition.

“We see visible near-term opportunities in FPSO, where Seatrium’s record and three yards in Brazil position it well to meet local content requirements,” analyst Lee Chokwai said.

UOBKH said an order book restored to at least S$15 billion to S$18 billion equivalent to 1.5 years of Seatrium’s target annual revenue (S$10 billion to S$12 billion) as well as confidence in Seatrium being able to sustain an order win momentum of at least S$9 billion for an extended period, will make it more bullish.

Signalling internal confidence in its fundamental valuation despite the analyst downgrade and price weakness, Seatrium actively resumed market purchases, executing its latest daily share buyback on Tuesday.

Morningstar noted that with about S$90 million completed under its initial S$100 million buyback initiative, it expects a new programme once the current one is completed.

“Assuming another S$100 million authorisation, it would represent about 1.4 per cent of the current market cap,” Morningstar’s Lee said.

Notwithstanding some analysts’ views, investors may also be taking profit on Wednesday amid overall market weakness. Seatrium stocks surged 8.9 per cent on Monday following its results on Jul 31 and were trading at S$2.17 at 11.32 am on Wednesday, 1.8 per cent or S$0.04 lower.