Seatrium Limited (formerly SembCorp Marine and KOM)

[CY09]

https://www.channelnewsasia.com/business...an-3028676

SCM is now buying KOM discontinued operations for a considerations of S$4.5million instead of s$4.87 million. While there is indeed a downward revision, the truth is it is still very expensive. Keppel has started reporting this discontinued business and it is only earning annually about $130-$150 million (NAV is negative). I dont think SCM is getting a good deal.

If Keppel thinks that its legacy offshore assets are worth s$4.5 billion, instead of going SCM, it should publish a tender to invite all interested parties. I feel it is unlikely anyone will bid s$4.5 billion for it, unless it is Temasek : p

A closer value should be in the region of s$3 billion as the segment Keppel is selling to SCM are the offshore oil rigs capabiltieis etc which are "non-green friendly" products which has diminishing demand due to climate change. SCM mgmt should just walk away from the deal and let Keppel do an open tender exercise to see how much it is worth.

[dreamybear]

I think it's rather disappointing for OPMIs.

I hope other companies provide the option of in-person meetings ....

------------------

Sembmarine says fully virtual EGM ‘most practical and effective’ way to vote on Keppel O&M merger
https://www.straitstimes.com/business/se...-om-merger

"....In response to a Letter to the Editor published in The Business Times, which said that the EGM should be held in person, Sembmarine on Tuesday said it “had considered various options” for the meeting....."

[weijian]

That is a lot of outstanding receivables!

UPDATE REGARDING PAYMENT OF RECEIVABLES FROM BORR DRILLING

Borr Drilling announced on 23 October 2023 that it has launched a USD1.5 billion senior secured notes offering. Borr Drilling further announced on 24 October 2023 that it has raised an equivalent of USD50 million in a private placement. The proceeds from the notes and equity offerings are intended to be used to repay all of its outstanding secured borrowings, including the shipyard delivery financing arrangements with PPLS.

The Company wishes to update that PPLS has received a prepayment notice on 6 November 2023 for its receivables amounting to approximately SGD968 million from Borr Drilling. The funds are expected to be received on 8 November 2023.

https://links.sgx.com/FileOpen/SGX%20Ann...eID=777178

[weijian]

After the name change, time to kitchen sink everything and then start anew.

FY2023 Earnings Guidance

Singapore, 30 January 2024 - Seatrium Limited (Seatrium, or the Group) refers to its 3Q/9M 2023 Business Update on 8 November 2023 where the Group had announced that while it anticipates operational and financial performance to continue to improve, it expects to make a net loss for Financial Year 2023 (FY2023).

In line with the Group’s business transformation, management undertook a strategic review of its business focus, operational footprint, and assets required to support its strategy of building a profitable and resilient business going forward. It has since completed the review, and identified core assets which bring synergies to the Group, as well as non-core assets which are surplus to its operations that would be written down.

As a result of the strategic review, the closure of surplus non-core assets and write-down of excess and obsolete inventories are expected to improve Seatrium’s productivity, optimise its cost structure and reduce cash operating expenses, resulting in significant value creation in the medium to long term.

https://links.sgx.com/FileOpen/FY2023%20...eID=785206

[retired1again]

Such closures and write-downs are so typically adopted by many CEOs to clean up the balance sheets in their initial years (a new broom sweeps clean). It will be hard for the shareholders to question the Board of Directors on such moves especially almost all of the board of directors were newly appointed.

Hopefully, the company's "productivity" will improve as expected and hence, result in achieving much better earning performance from the next quarters.

[weijian]

The shareholders does have valid points such as Keppel Corp (KC) using the whole orderbook figures of its subsidiary contract win to boost KOM's figures vis-a-vis SCM. Its quite surprising that KOM is able to hive off the 5 rigs ordered from Borr- Tivar, Vale, Var, Huldra, Hedirun, which has been fully built and kept in cold store since 2021. This means the cash proceeds (approx $500 million) upon delivery in 2025 will be channeled to Keppel Corp instead of SCM.

To me, the whole corporate structuring has been unfairly tilted to Keppel Corp's favour where KOM is taking a larger pie and despite being in a worse shape (with negative equity). In fact, it does not have much orders, outside the Hyundai's venture. It does show what the "invisible boss" behind the scenes is saying... KC to hive off its unprofitable assets become a property/teleco company and SCM becomes like a bad debt bank collecting all the struggling O&M units.

While rigs utilizations rate has grown to 80%, it is still below 1Q2020's level, no new orders has been won by SCM for 5 months for shallow water rigs. It tells how bad the state of rig building is. My view still stands where SCM should not even acquire KOM's assets when it is going to be idle come 2024. KOM should just liquidate itself since it has demonstrated the ability to hive off the Borr legacy assets, keep in a separate entity and tell KC to write off a few million to billion in yard asset sales. Of course, this does not look good to KC as there are not many rig builders available to buy off its assets.

(not a SCM investor since July 2021 as from the series of corporate events I viewed SCM as an "unfavored child for OPMI" in the Temasek family)

So after buying KOM at above "book value" and the latter been stripped off of 500mil cash and rigs that could produce cashflow in an increasing active upstream E&P environment, Seatrium also has to be on the hook for 82mil of KOM's penalties?

That is really a bad deal for Seatrium I suppose.

Seatrium Achieves Positive EBITDA for FY2023

The Group also announced today that it has reached in-principle settlement agreements with the Brazilian Authorities in relation to the historical event Operation Car Wash4 , amounting to a settlement payment of R$670.7 million (equivalent to approximately S$182.4 million5 ), subject to post-closing compliance obligations. In addition, the Group has also made a provision of S$82.4 million for indemnity to Keppel Corporation in relation to this matter. The Group has already implemented effective compliance controls and rigorous anti-corruption training and compliance regimes

https://links.sgx.com/FileOpen/FY2023%20...eID=789639

[weijian]

Since Covid19, SCM and KOM had almost won all (except 1) the FPSO tenders from Petrobras, and so it is probably no surprise they continue to win more. The last FPSO was awarded in 2022 at ~3billion USD and this current pair is ~8.2bil USD (or 4.1bil per unit). Did a combined entity allowed more "bargaining power"? Or the +33% price simply inflation at work? Or these new builds have "more features"?

Whatever the case, repeated builts will definitely have better GPMs.

Seatrium Secures FPSO Newbuild Contracts P-84 and P-85 from Petrobras

With the contracts valued at approximately S$11 billion, these high throughput FPSOs will be deployed in the Atapu and Sépia fields, located in the eastern part of the Santos Basin, approximately 200 kilometres offshore of Rio de Janeiro in Brazil.

Its current order book includes four other Petrobras FPSO newbuilds, the P-78, P-80, P-82 and P-83.

https://links.sgx.com/FileOpen/PetrobasC...eID=804619

[CY09]

In recent times, Seatrium had a sell down in share prices. The company had utilised its very small $100 million sharebuyback to stem the fall. In the span of a few trading days since $1.75, it has used closed to $10 million. Quite interested to see how it goes. In about 2 months, based on the rate it is going, the sharebuyback will utilise its full amount

Will show how investor friendly seatrium is.

https://links.sgx.com/1.0.0/corporate-an...18fb88979a

[weijian]

In recent times, Seatrium had a sell down in share prices. The company had utilised its very small $100 million sharebuyback to stem the fall. In the span of a few trading days since $1.75, it has used closed to $10 million. Quite interested to see how it goes. In about 2 months, based on the rate it is going, the sharebuyback will utilise its full amount

Will show how investor friendly seatrium is.

https://links.sgx.com/1.0.0/corporate-an...18fb88979a

Does the action of SBB (share buyback) really determines how "investor friendly" the Mgt of the company is?

Or is it actually more of a reflection of its capital allocation capabilities (or lack of) of the Mgt based on the context of the SBB?

I am actually surprised that Seatrium has a SBB program and decided to execute it. Let's put into context as below:

(1) From FY23, Seatrium paid 229mil of interest costs for the year with an avg FY22/23 total debt of ~3.05bil. This translates to interest cost or 229/3050 = 7.5%. This cost of capital (in this case, debt) is pretty high and if it stays the same in 2024, would it be better to use SBB money to pay down debt that would immediately yield 7.5%?

(2) When one decides to buy back their own shares, the share price matters. Let's say if it buys its own shares at P/E=5, it is actually equivalent to buying a 3rd party unlevered asset with ROE=20% (PE inverse). So what is the ROE of buying their own shares? It is negative. Would one be happy that Mgt is buying something that is losing money?

So I reckon Seatrium Mgt is probably seeing something I don't - In the very near future, Seatrium's earnings will turn positive and explode - so much that the current SBB will eventually translate to effective P/Es as low as 12 (8.3% earnings yield) and therefore higher than the cost of debt.