Results

• Higher profit - Bumi Armada posted a net profit of RM62.2m in 1Q19, which grew 29% YoY due to higher contribution from associates and JVs, lower depreciation and tax. However, normalised net profit declined 30% to RM67.7m. Operating profit declined due to lower revenue.

• Lower revenue – 1Q19 revenue declined 18% YoY to RM491.6m following lower contributions from Floating Production & Operation (FPO) (-8% YoY to RM425.6m due to lower revenue from Armada TGT FPSO subsequent to its extension agreement in August 2018) and Offshore Marine Services (OMS) (-53% YoY to RM66m due to completion of the LukOil project in December 2018).

• Better QoQ – Compared to the previous quarter, 1Q19 normalised net profit almost doubled to RM67.7m despite quarterly revenue falling 15% QoQ following lower revenue from OMS (-66% QoQ) and higher revenue from FPO (+12% QoQ due to higher contribution from Armada Kraken FPSO).

• Steady orderbook – Orderbook remains steady at RM19.3b (FPO: RM18.3bn, OMS: RM1bn) another RM9.8bn worth of potential extension. This will sustain the group’s revenue for the next few years.

• Debt refinancing – The management secure refinancing for its unsecured term loans of US$380m (RM1.57b) and revolving credit facilities of US$280m (RM1.16b) into a single facility consisting of Tranche 1 facility of US$260m (RM1.07b) and Tranche 2 facility of US$400m (RM1.65b) with repayment term over 2 and 5 years respectively.

Earnings Outlook/Revision

• Exceeded expectation – 1QFY19 normalised net profit of RM67.7m achieved 34% of our full year forecast of RM201.7m while revenue for the same period achieved 18% of our FY19 forecast.

• Forecasts maintained – We are keeping our earnings forecast for FY19 and FY20 in anticipation of operational challenges.

Valuation & Recommendation

• Maintain BUY call with an unchanged target price of RM0.47 based on its 3-year mean PER of 13.6x and FY19 EPS forecast. Risks remain its high debt and gearing level despite the recent refinancing.

• Potential upside is the possible compensation of US$280m (>RM1b) from the Armada Claire court case which has commenced earlier this year.

Source: JF Apex Securities Research - 28 May 2019