Citi Research has upgraded its call on Seatrium from &ldquo neutral&rdquo to &ldquo buy&rdquo , with an unchanged target price of $2.65, on the back of valuation and potential resilience with its share buyback programme. 

 

Analyst Luis Hilado says that Seatrium&rsquo s recent $15 billion win of a FY2025-FY2029 Floating Production Storage and Offloading (FPSO) contract and wins in FY2024 and y-t-d, should provide long term revenue visibility into FY2031. 

 

The completion of the acquisition of Keppel O& M in February 2023 and resolution of prior arbitration cases have lifted part of the previous overhang on the stock, in his view. 

 

A steeper learning curve involved in some of its renewable energy projected and ongoing costs and supply chain uncertainty are key risks to the analysts&rsquo outlook. 

 

Hilado notes that a significant portion of the company&rsquo s approved $100 million share buyback programme remains in place with only $46.4 million utilised y-t-d. Its buybacks in January 2025 were at an average price of $2.20 per share. 

 

As such, there is a possibility that the company may conduct further buybacks, and its share purchase mandate could again be renewed at the upcoming annual general meeting. Hilado also believes that the cancellation of treasury shares to increase shareholder returns could also take place this year. 

 

The analyst&rsquo s target price for Seatrium is based on a price to book approach as the FY2023 write-offs have significantly lessened the risk of goodwill impairments. 

 

He applies a target multiple of 1.2 times on FY2026 as he believes the market will look into its long-term prospects as new higher-margin contracts should raise returns further and push ROE higher. Target price is based on FY2025 price-to-earnings ratio of 17 times and ev/ebitda of 9 times.