PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 23 Oct 2020, 9:35 AM


Bumi Armada Berhda - Steadier Performance From Kraken

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Stripping-off exceptional items, Bumi Armada’s (BAB) 2QFY20 core net profit jumped 72.5% YoY to RM108.2m attributed to strong uptime and performance of FPSO Armada Kraken. With strong earnings in the quarter, the Group reported core net profit of RM197.9m (+45.5% YTD) in 1HFY20 on the back of a 12.9% YoY increase in revenue. Earnings are above our and consensus full year estimates at 65.8% and 64.8% respectively. We see BAB bieng able to register stable earnings ahead, with steadier performance from FPSO Kraken mitigating the impact of weak performances of its OSVs on lower utilization and charter hire rates given the unappealing oil prices. Our FY20-22F earnings forecasts are adjusted slightly higher by an average of 9.4% to account for better performance from the FPO segment. That said, the Group’s net gearing of 2.8x remains a key concern with RM679.6m in unsecured loans due in May 2021. We maintain our Neutral call with a revised TP of RM0.32 after the earnings adjustments.

  • Steadier performance from Kraken. The Group reported 2QFY20 core net profit of RM108.2m (+20.5% QoQ) on the back of RM606.8m (+9.8% QoQ) revenue. This was mainly due to strong uptime and performance of FPSO Armada Kraken, offsetting the lower recognition from the Group’s OMS segment as well as higher maintenance costs for Armada Olombendo. OSV utilization was slightly lower in 2QFY20 at 55% vs. 56% in 1QFY20.
  • Outlook. The Group’s earnings are expected to remain stable on the back of steadier performance from the FPSO Kraken with production efficiency remaining high at above 90%. Nevertheless, the Group’s net gearing of 2.8x with total debt as RM9.4bn as at June-20 remains a key concern with RM679.6m in unsecured term loans from a facility agreement signed in April 2019 (to refinance the Group’s unsecured term loans and revolving credit) is due in May 2021. Cash currently stands at only RM849.5m. With the current unappealing oil prices and weakened business sentiment following the Covid- 19 pandemic, the Group’s progress on asset monetization initiatives is expected to be delayed. No vessels were disposed in 2QFY20, as opposed to two vessels in 1QFY20. That said, it is expected to remain committed to meeting its repayment obligations using the collection from trade receivables.

Source: PublicInvest Research - 1 Sept 2020

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