News

• Bumi Armada (BAB) announced that it has secured a contract for the conversion, supply and operations and maintenance of one floating storage unit (FSU) at Delimara, Malta from ElectroGas.

• The cont ract duration is 18 years and 2 month with value of US$300m (or RM1.1bn).

• The acquisition of the LNG carrier for the conversion to FSU is currently being finalised. The FSU is expected to commence operations in 2016. Financial Impact

• With an assumption of 25% net margin, we estimate the FSU to contribute RM15m per annum to the bottomline or 2.4% increase to our FY16 PAT forecast. We estimate the FSU contract to increase our SOP by 3%.

Pros/Cons

• We are positive but not surprise about the FSU win. As we mentioned previously, BAB has high chance to secure a FSU contract with 18 years contract duration in Europe. This marks its maiden venture into the floating LNG business in addition to its traditional FPSO and OSV business.
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• FSU/FSRU and FLNG segments should provide new growth opportunity for BAB going forward.

• According to Upstream, ElectroGas (a consortium made up of Gasol, Socar Trading, GEM Holdings and Siemens) has won a deal to build and operate a LNG receiving terminal in late 2013. The LNG import facility at Delimara involves a midsize floating storage unit and the regasi fication of an initial 55m to 66m cubic feet per day of gas.

• Total orderbook will increase from RM37.2bn to RM38.3 bn.

Risks

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

Forecasts

• Maintained pending more detail information from management.

Valuation

• We maintain our BUY call with unchanged of TP RM1.54 based on SOP valuation method.

Source: Hong Leong Investment Bank Research - 15 Apr 2015