SINGAPORE - Shares of offshore marine engineering company Seatrium have risen sharply in recent days from a combination of short covering, institutional buying and share buybacks.
The counter surged to an intraday high of $1.61 around 10am on Sept 3. It closed 1.3 per cent higher at $1.57 on Sept 3.
The stock closed at $1.45 on Aug 29, before climbing 2 per cent on Aug 30 and 4.7 per cent on Sept 2. It has risen more than 8 per cent in just three trading sessions.
Several analysts and brokers attributed the sharp pickup to short covering, as traders who had shorted the stock bought back the shares to close out their positions. The counter saw a sharp selldown just after it announced its first half-year results on Aug 2.
The uptick also comes as the company started its share buyback programme over the past few days. Earlier in 2024, the company obtained shareholder approval to buy back $100 million worth of shares. The company last week bought back some $2 million worth of shares at an average price of $1.4833.
Mr Thilan Wickramasinghe, research head at Maybank Securities, also reckons some institutional funds have been slowly getting into the stock, which some market experts think is more than 40 per cent undervalued based on discounted cash flows, and is still trading over 45 per cent below estimated fair value of $2.88.
UOB Kay Hian on Sept 3 added Seatrium to its Alpha Picks list of stocks which will likely outperform the market this month. Noting strong order books and steady project completions, the investment house maintained its “buy” call on the stock, with a six- to 12-month target price at $2.31 based on a price-book multiple of 1.15 times.
The recent perk up its stock price also comes following analysts’ re-rating of the company after it posted a turnaround in its performance numbers.
After swimming in red ink for six years, Seatrium returned to profitability, fuelled by a tailwind of new orders on the back of buoyant energy prices.
The group posted underlying net profit of $115 million for the half year to end-June. This was a $379 million turnaround from losses in the year-ago period. Net profit attributable to shareholders came in at $36 million, reversing a loss of $264 million a year earlier. Earnings per share stood at 1.05 cents, versus a loss of 9.4 cents.
The results came on the back of revenue growth of 39 per cent to $4 billion, from $2.89 billion in the year-ago period.
Seatrium also sits on record order book now surpasssing $26 billion. It has also been cleaning house by clearing up legacy issues left behind by a 10-year slump in the oil market, and is seeing a significant strengthening of its balance sheet.
