Balancing Arbitration Risks and Valuation Upside: Reiterating Buy on Seatrium for Attractive Risk-Reward and Margin-Driven Rerating Potential

CGS International analyst Lim Siew Khee reiterated a Buy rating on Seatrium Limited yesterday and set a price target of S$2.67.

Lim Siew Khee has given his Buy rating due to a combination of factors that balance the current arbitration risks with Seatrium’s longer-term fundamentals. He notes that while Seatrium and Aibel are pursuing sizeable claims against each other over the DolWin5 project, Seatrium has already finished its core work on the platform and sent it on for subsequent phases. Importantly, Seatrium’s internal review suggests its potential financial exposure from its direct project scope is limited to about €5m, which management deems too small to justify booking provisions at this stage. The dispute is also ring-fenced to a legacy contract and does not affect Seatrium’s newer high-voltage projects with GE Vernova under TenneT’s 2GW programme.

Lim also highlights that the ongoing litigation could temporarily restrict share price upside, particularly in light of the recently resolved Maersk dispute, but he sees this as a sentiment overhang rather than a structural earnings threat. His target price of S$2.67 is derived from valuing the stock at 1.3 times forecast FY26 book value, implying a discount to Seatrium’s historical trading multiple and leaving room for valuation recovery. He identifies potential upgrades in profitability, especially stronger-than-expected margin improvements, as the main driver for a rerating. At the same time, he flags execution risks such as possible cost overruns and project cancellations, but overall judges the risk-reward profile as attractive enough to support a Buy recommendation.

In another report released on January 16, TipRanks – Google also reiterated a Buy rating on the stock with a S$2.50 price target.

SMBMF’s price has also changed moderately for the past six months – from S$2.390 to S$2.120, which is a -11.30% drop .