MARINE stocks listed on the Singapore Exchange have been booming over the past year – and even beyond – and analysts are optimistic on continued growth for this sector.
Yangzijiang Shipbuilding had a nearly 80 per cent increase in its share price over the past year, while Marco Polo Marine was up by more than 12 per cent. Seatrium jumped about 52 per cent in the past six months.
Analysts listed factors such as an industry upcycle, supply crunch and rebound in global demand.
Lim Siew Khee, head of Singapore research at CGS International, said: “The shipping industry is undergoing an ordering upcycle.
“Thanks to the increased shipping activity since Covid-19 and subsequent elevated freight rates, ship liners have built strong balance sheets. This has led to record-high orders for shipyards such as Yangzijiang.”
She noted that shipyard capacity is tight, with most orders booked for 2028 onwards.
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Demand for offshore support vessels is driven further by exploration and production activity in the oil and gas (O&G) industry, said Lim.
But low oil prices and a lack of bank financing have been limiting the construction of new vessels since 2015, she added.
“This supply crunch has led to a more than double rebound in vessel charter rates since 2021 for vessel owners such as Nam Cheong, Mermaid Maritime, Marco Polo and et cetera,” said Lim.
Greener vessels and LNG carriers
Analysts pointed out that the International Maritime Organisation’s regulations for sulfur emissions for the shipping industry implemented in 2020 (IMO 2020) have boosted demand for greener vessels. The regulations stipulated that the global upper limit on the sulphur content of ships’ fuel oil must be reduced to 0.5 per cent (from 3.5 per cent), with the goal of lessening harmful pollution emitted from ships.
Lim said many liners have initiated fleet rejuvenation programmes to meet the regulations, spurring demand for dual-fuel containerships and even eco-friendly gas carriers.
Similarly, Ng Xin-Yao, investment director at abrdn, observed replacements towards greener vessels following IMO 2020, as well as growing demand for liquified natural gas (LNG) and LNG carriers.
“We think this has the potential to be a decade-long cycle if capacity expansion remains limited,” he added.
Ng said Singapore shipbuilders can benefit from the rise in demand for LNG carriers as Korean shipbuilders – Singapore’s biggest competition – shift their focus to large LNG carriers.
“Across the sector, we see demand exceeding supply still. Newbuild prices have been going up. The Korean and Singapore shipyards, and increasingly the Chinese shipyards too, have capacity fully booked till 2027 at least, while capacity beyond that is also getting filled.
“At the same time, steel prices have been kept low by a softer Chinese economy. Therefore, visibility in terms of revenue, profits and cash flow are well for several years ahead,” he added.
On a global scale, orders for floating storage, production and offloading (FPSO) units have increased along with floating production units, Lim noted. She said that this was due to crude oil prices trending between US$70 and US$90 per barrel since late 2021. The price increase compared with US$55 per barrel from 2015 to 2020 may have increased capex plans from cash-rich oil producers.
What could investors focus on? Ng said he likes shipbuilders in Singapore, Korea and China, as shippers start to invest in new vessels again.
“We also like service companies who benefit from the increased vessel deliveries who are the next wave of beneficiaries, although there are few listed companies specialised in this area,” he added.
CGS analysts like Yangzijiang for its strong order book with deliveries set to be till 2029. The company can positively surprise on its order win target for 2025, which management guided to be higher than last year’s target of US$4.5 billion, they said.
They also named Seatrium, noting that it won more than S$16 billion worth of contracts for Petrobras P-series FPSO vessels platforms and a TenneT offshore converter platform in 2023 and 2024.
Maybank Securities analyst Jarick Seet forecasts that demand from O&G and offshore windfarms will remain strong, bolstering Marco Polo Marine’s and CSE Global’s shares.
“We expect its Commissioning Service Operation vessel to start contributing in H2 FY2025, as well as charter rates to remain resilient and potentially rise further due to strong demand from both O&G as well as offshore wind farms,” he said about Marco Polo Marine.
