- We maintain our BUY call on Bumi Armada, with an unchanged sum-of-parts-based fair value of RM4.30/share, which implies an FY13F PE of 24x.

- Bumi Armada has declared an additional gross dividend of 0.14 sen/share for FY12, slightly raising the group’s DPS from the 3 sen tax-exempt dividend declared in February this year. Utilising its remaining tax credits, the group will move to a single-tier tax system for its dividends on 1 January 2014.

- On a separate note, the group has appointed Tunku Ali Redhauddin ibni Tuanku Muhriz, aged 35, as its new independent and non-executive chairman, replacing Datuk Seri Muhamad Fathil Mahmood, aged 64, who will remain as a director. Dato' Ahmad Fuad bin Md Ali, who will retire from his position as deputy chairman, has expressed his wish to pursue other external personal/business interests.

- Tunku Ali is the most senior of the Putera Empat of Negeri Sembilan royalty, having worked previously in Khazanah Nasional’s Investments Division and McKinsey & Co. He also sits on the boards of several companies including Asia Capital Reinsurance Malaysia, Themed Attractions and Resorts, Destination Resorts and Hotels and Iskandar Malaysia Studios.

- We are positive on the group’s emphasis to strengthen its management with strong political connections, given the relationship-building requirements in the country’s oil & gas industry.

- But the next FPSO projects which Bumi Armada is eyeing are likely to come from overseas projects as the group is in the final short-list for EnQuest’s Kraken project in the North Sea, Afren’s Okoro block off Nigeria and ENI’s OML field of Nigeria. Additionally, amongst 172 FPSO projects in the planning stage globally, the group has identified up to 34 developments which it is likely to participate in (See Charts 1-2).

- Hence, we continue to like the stock due to:- (1) Likelihood of new floating production storage and offloading (FPSO) vessel contracts as oil & gas developments reignite globally, (2) tightening vessel utilisation rates, and (3) premium scarcity for oil & gas stocks with large market capitalisation.

- The stock currently trades at an attractive FY14F PE of 20x compared with SapuraCrest Petroleum’s peak of 29x in 2007. But for our oil & gas picks, we prefer SapuraKencana Petroleum, which has a larger order book, more transparent earnings growth momentum from its recent tender rig acquisitions from Seadrill and larger exposure to domestic oil & gas contract awards.

Source: AmeSecurities