Results / Briefing

• Slightly  Below :  3QFY14  PATAMI  grow 10% QoQ,  bringing 9MFY14  PATAMI  to  RM271m,  making  up  65%  and  60%  of HLIB and consensus full-year  estimates, respectively .    

Deviations

• Mainly  due  to  slower  progress  recognition  of  Kraken  and Angola  projects.

Highlights

3QFY14  PATAMI  grow  by  10%  QoQ  mainly  due  to  FPSO contribution from Kraken  and Angola coupled with  increased T&I  activities  in  the  Caspian  sea  and  b etter  utilisation  rate from OSV segment.

OSV revenue has improved QoQ as a result of c ontinue fleet renewal  program  with  3  Class  B  vessels  (>12  years  or  <8k BHP)  disposed  and  7  more  vessels  held  for  sale.    Fleet renewal programmes is expected to  be completed by 4Q14. Overall,  group vessels  utilization improved  from 72% to 74%.

Despite  risk  of a slowdown in E&P capex   due to declining oil price,  it  remains  confident  about  the  long  term  outlook  for FPSO.  Currently,  Bumi  is  targeting  3  major  FPSO  bids  in Ghana,  Nigeria  and  Namibia  and  expects  the  result  of tenders  to  be  known  by  1QFY15.   In  addit ion,  there  are  9 FPSOs  bids  upcoming  with  4  in  Asia  and  5  in  the  Atlantic Corridor.  Bumi is  also finalising  contract for FPSO Madura.

Total  orderbook  stood  at  RM33.6bn  (RM21.8bn  on  firm  and RM11.8bn on extensions). Including  50% of Madura  contract will further  raise orderbook  to RM35.4bn.

FSRU  and  FLNG  segments  provide  new  growth  opportunity going forward. The company will focus on small -scale FSRU and  was a  short listed bidder for several FSRU projects.  We have not captured any contribution from  FSRU projects in our earning  assumptions.  This  will  be  the  wildcard  for  the company  and also help to mitigate the dilution from  cash call .

Risks

• Increased  competition as new players enters  the market.
• Execution risk, including  oil spills and their clean-up  costs.
• Plunged  in crude oil price.

Forecasts

• FY14  earnings  adjusted  downward  by  7%  to  reflect  slower earnings  recognition  for  Kraken  and  Angola  project s  under finance  lease  and  lower  margin  for  T&I.   However,  the underlying  cash  flow  for  both  the  FPSO  projects  remains unchanged.

Valuation

• We maintain  our  BUY  call with  TP  reduced  from  RM2.06  to RM1.74  based  on  SOP  valuation  method  following adjustment  to  the  group  net  debt  position  and  lower  value from T&I  segment.

Source: Hong Leong Investment Bank Research - 21 Nov 2014