• Share prices rebounded to RM0.71 from all-time low of RM0.65. After hitting all-time low of RM0.65 (31 May and 1 June), ARMADA’s s hare prices rallied 9.2% to close at RM0.71 yesterday. The sharp rebound was mainly spurred by improving sentiment on O&G stocks amid recovering oil prices and inves tors ’ optimism of a positive outcome from the court dispute over FPSO Claire claims, as the market may have overpriced the risks of the termination of Armada Claire by extending this risk to ARMADA’s other projects .

• Look beyond 2016. Core FY16 PATAMI is expected to drop 34% yoy but a rerating is in the pipeline upon deliveries and successful execution of its 4 new FPSO jobs (from 2017 onwards), a normalised tax rate and better income contributions from associates and JV assets coupled with a recovery of utilisation in the OSV and T&I, resulting core profits to surge by 54% CAGR from 2016- 2018.

• Bullish downtrend line breakout. Yes terday, AR MADA’s s hare prices jumped 4.4% to RM0.71 (above downtrend line resistance of RM0.685), supported by huge volume of 51m shares (142% higher against 3-month average) and bottoming up indicators. We expect prices to climb higher in the near term towards RM0.75 (23.6% FR) and RM0.80 (38.2% FR) levels. A decisive breakout above RM0.80 will spur prices higher to test our long term price target of RM0.90 (200-d SMA). Key supports are RM0.685 and RM0.66 (daily lower Bollinger band). Cut loss at RM0.65.

Source: Hong Leong Investment Bank Research - 8 Jun 2016