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.
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MQ Trader 3213 views | 3 d ago
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....