Affin Hwang Capital Research Highlights

Bumi Armada ropes in Shapoorji Pallonji for Madura FPSO project

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Publish date: Mon, 13 Apr 2015, 10:31 AM
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This blog publishes research highlights from Affin Hwang Capital Research.

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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