Results

• Improved profit - Bumi Armada’s posted a net profit of RM63.8m in 4Q17 against a net loss of RM1.4b in 4Q16 in absence of impairment costs of RM1.15b in 4Q16. Revenue jumped 523% YoY to RM662.1m due to higher contribution from Floating Production & Operation (FPO) while sales from Offshore Marine Services (OMS) were flat.

• FPO leading growth – 4Q17 revenue from FPO surged 582% YoY to RM452.8m due to increased revenue from Armada Olombendo FPSO, Armada LNG Mediterrana Floating Storage Unit (FSO) and Armada Kraken FPSO.

• Lower OSV utilisation – 4Q17 revenue from OMS was flat adding 4% YoY to RM209.3m. Offshore support vessel (OSV) utilisation rate was slightly higher at 46% (vs 53% in 3Q17) due to unfavourable weather conditions.

• Lower QoQ – 4Q17 net profit declined 48% QoQ due to decline in share of profit from joint ventures (-70% QoQ to RM24.6m) and lower revenue from OMS (-12% QoQ) revenue higher revenue from FPO (+12% QoQ).

• FPOs progressing well – Management updated that Bumi achieved 99% uptime on its operating vessels with the Armada Kraken (North Sea) moving towards final acceptance by 2Q18 while Armada Olombendo completed its 20th offload in 4Q17. As of end-December, Karapan Armada Sterling III (Madura) received 100% of day rate after completing the world’s first molten sulphur offload.

• Strong orderbook – Orderbook remains steady at RM22.3b (FPSO: RM20.7bn, OMS: RM1.6bn) vs RM22.7bn in 3Q17 with another RM12.5bn worth of potential extension. This will sustain the group’s earnings for the next few years with FPSO contracts ranging from 4 to 12 years.

Earnings Outlook/Revision

• Slightly below expectation – FY17 normalised net profit jumped to RM360.6m from a normalised loss of RM224.5m FY16, making up 93% of our estimate. However, revenue for the same period surged 82% YoY to RM2.4b, achieving 86% of our forecast.

• Forecast maintained – We are keeping our forecasts intact for FY18 and FY19 as the FPSOs will boost future earnings.

Valuation & Recommendation

• Maintain BUY call with an unchanged target price of RM1.10, which is pegged at 13x FY18F EPS.

Source: JF Apex Securities Research - 27 Feb 2018