Bumi Armada announced that the group and Shapoorji Pallonji And Company Private Limited (SPCL) has formed a 49:51 JV Company, Armada Madura, to undertake the engineering, procurement, conversion and construction (EPCC) of a floating production, storage and offloading vessel (FPSO). To recap, Bumi Armada and its partner, PT Gema Marine Service (PT GMS) had in 2014 secured a US$1.18bn contract from HuskyCNOOC Madura Limited for the provision of a FPSO for charter and development at the Madura BD Field in Indonesia. The contract was awarded to PT Armada Gema Nusantara (PT AGN), a JV company between Bumi Armada (49%) and PT GMS (51%). Armada Madura has on 10 April 2015 entered into a sale and purchase agreement with PT AGN for the sale and delivery of a FPSO to PT AGN, to enable PT AGN to perform its obligations under the Madura FPSO charter contract. (Source: Bursa Malaysia)
Comment: Armada Madura is the third partnership between Bumi Armada and SPCL. The group has a strong working relationship and are partners in the India's C7 FPSO and D1 FPSO projects. As such, we opine that the group can continue to leverage on each other strengths (balance sheet strength, technical knowledge) to deliver the Madura FPSO. We are mildly positive on the announcement. SPCL is, in our view, no inferior to PT GMS in technical expertise and financial strength. We have imputed in our forecast a 49%-stake in the Madura FPSO project and hence, no change to our earnings forecast, HOLD rating and SOP-derived TP of RM1.24.
Source: Affin Hwang Capital Research - 13 Apr 2015
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