Results/Briefing

• Below: 1HFY15 core PATAMI (excluding impai rment charges of RM384m) fell by 3.9% YoY, bringing 1H core PATAMI to RM157m, making up 36% of HLIB and consensus full-year estimates, respectively.

Deviations

• Mainly due to poor performance from T&I and OSV segments which were making losses.

Dividends

• None.

Highlights

• 2QFY15 core PATAMI fell by 21% YoY after adjusted for total non-cash expenses of RM384m arising from impai rment charges on OSV, T&I and non-core assets at joint venture. The fall in core profit was mainly due to poor performance from OSV and T&I divisions which were making losses.

• Overall utilisation for OSV fell from 71% to 54% QoQ given the challenging market outlook. T&I was affected by lower utilisation from Armada Hawk and Condor. Management expects both divisions to remain weak going forward.

• Total orderbook stood at RM39.1bn (RM25.8bn on fi rm and RM13.3bn on extensions), including RM1.1bn Malta FSU contract which was signed in Apr 15.

• Construction for Armada Kraken and Armada Olombendo (Angola) are on track to complete by 3Q15 and 4Q16, respectively.

• FSU/FSRU and FLNG segments should provide new growth opportunity for BAB going forward. To recap, BAB has secured US$300m FSU contract in Europe. The cont ract duration is 18 years and 2 month. This marks its maiden venture into the floating LNG business in addition to its traditional FPSO and OSV business.

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

• FY15 and FY16 earnings reduced by 27% and 26% respectively after factored in lower performance from T&I and OSV segments in view of the challenging outlook. We are conservatively excluding value of T&I and OSV from our SOP.

Valuation

• We believe the weak result already reflected in its share price. Hence, we maintain our BUY call with TP adjusted from RM1.54 to RM1.15 based on SOP valuation method posted adjustment on the T&I and OSV values.

Source: Hong Leong Investment Bank Research - 28 Aug 2015