Bumi Armada (BAB) reported a 20% YoY increase in 1QFY22 core net profit to RM177.4m, on the back of RM529m revenue (-6% YoY). The improved profitability is attributable to i) higher vessel availability for FPSO Kraken as it had a planned shutdown in February 2021, ii) lower depreciation charges by 30.3% as FPSO Claire has been fully depreciated, and iii) lower finance costs by 16.5% following the repayment of USD107m of debt during the quarter. Core net profit is broadly in line with our and consensus expectations, meeting 28% and 29% of full year FY22 earnings forecast respectively. Balance sheet continues to improve with net gearing down to 1.3x from 1.6x at the end of last year. We maintain our conservative projections for FY22/23/24 as margins could be tested by inflationary costs, inspectional and maintenance costs as well as unforeseen operational disruptions. As such, our Outperform call with a TP of RM0.64 is kept unchanged.

• QoQ results highlight. The Group reported higher revenue and core net profit in 1QFY22, on a sequential basis, by 3.1% and 23.8% to RM529m and RM177.4m respectively in the absence of FPSO Olombendo’s repair and maintenance costs as well as higher vessel availability for FPSO Kraken. The performance was also supported by, i) lower depreciation by 10.3% as FPSO Claire had been fully depreciated, and ii) lower finance costs by 8.4% following the repayment of USD107m of debt during the quarter. Operating profit and EBITDA margin expanded 9.2 ppt and 6.3 ppt to 48.4% and 64.2% respectively. The Group disposed 4 vessels this quarter including the 3 ice class vessels, leaving the Group with only 3 vessels currently.

• Outlook. We foresee the overall outlook for the Group continuing to improve, and the balance sheet strengthening given steady performance from its FPSO segment. Net gearing reduced further to 1.3x from 2.1x a year ago and 1.6x at the end of last year, also strengthened by its on-going asset monetization program. Management is confident of disposing the idle FPSO Claire this year while the remaining 3 OSVs have also been classified for disposal as well. The Group’s FPSO 98/02 has achieved 87% completion and is on track to be completed by end of this year. It is understood that the Group is in active bidding for 2 contracts in Angola, i.e., i) Eni in the Agogo field in Block 15/06, and ii) TotalEnergies in the Cameia-Golfinho field.

Source: PublicInvest Research - 26 May 2022