- We maintain BUY on Bumi Armada with a higher SOPbasedfair value of RM1.50/share (vs. an earlierRM1.45/share), which implies an FY15F PE of 20x.

- We raise our FY15F-FY17F earnings by 1%-2% to accountfor a new floating storage unit (FSU) charter contract.

- Bumi Armada has secured a contract from ElectroGasMalta Ltd (EGM) for the conversion, supply, operationsand maintenance of an FSU for a project relating to theconstruction and operation of an LNG receiving terminallocated at Delimara, Malta.

- The contract, which is for a firm period of 18 years andtwo months, is worth approximately US$300mil(RM1.1bil). The FSU is expected to commence operationsin 2016.

- An LNG carrier, which has been approved by EGM, hasbeen identified by Bumi Armada as the conversion vesselfor the project.

- EGM has been awarded contracts by EnemaltaCorporation, the national electricity company of Malta, forthe supply and delivery of natural gas and electricity toEnemalta’s facilities in Delimara. EGM is a joint venturecompany comprising Gasol plc, GEM Holdings Ltd,Siemens Project Ventures GmbH, and SOCAR TradingSA.

- With the award of the FSU, the group’s firm order bookhas increased marginally from ~RM24.5bil to RM25.6bil,while its optional extension period order book stands atRM13bil.

- With a capex assumption of USD150mil, we do notforesee this to be a concern on its balance sheet. BumiArmada’s cash balance stood at RM3.3bil, and its netgearing is at 52% as at end-December 2014.

- Overall, we continue to like Bumi Armada for its earningsvisibility, underpinned by the long-term nature of itsFPSO contracts. Substantial earnings contributions fromthe Kraken and 15/06 FPSO will kick-in in FY16 and FY17upon the commencement of operations.

- The management had also earlier indicated that the groupwill embark on cost optimisation measures to enhance itsefficiency and productivity, which would includeheadcount reductions, divestment of certain low-yieldingT&I assets and exit of the oilfield services segment.

- The stock now trades at an FY15F PE of 14x, against itshistorical average of 29x.

Source: AmeSecurities