KUALA LUMPUR (Sept 26): Bumi Armada Bhd’s core net profit for the financial year ended Dec 31, 2024 (FY2024) could hit a record RM847 million, as its Kraken floating production offloading and storage (FPSO) unit is now operating at pre-pandemic levels.

Other factors that could improve its earnings significantly are the recognition of a bareboat charter (BBC) contract by its 30%-owned joint venture Sterling V FPSO, starting November 2023, and lower finance costs, said Maybank IB in a note on Tuesday.

The research house said three out of four hydraulic submersible pump (HSP) transformers at Kraken are now functional, with further replacements to come in this month. The FPSO had shut down completely in May 2023, following the failure of the three transformers.

“In 2Q2023, Bumi Armada booked-in repair costs of circa RM40 million... Going forward, we foresee sequential quarterly improvement in profitability in 2H2023 and now expect full status quo in FY2024.

“We take the view that the worst is now behind the group and upgrade Bumi Armada to ‘Buy’ with a higher sum-of-parts target price of 70 sen (from 58 sen),” the research outfit said.

Maybank IB noted that Bumi Armada had lowered its net gearing over 13 straight quarters to 0.7 times as at 2Q2023, from its highest at 2.9 times in 1Q2020, through healthy cash flows and sales of its non-core assets such as the Armada Claire FPSO and its offshore support vessels (OSV) business.

“We expect the group to continue its de-gearing exercise over the next few quarters with its strong operating cash flows, to reduce its finance costs and make room for future possibility of debt financing for its other ventures in the near future,” it said.

At the time of writing on Tuesday, Bumi Armada rose one sen or 1.82% to 56 sen, for a market capitalisation of RM3.32 billion.