Update

• Bumi Armada is selling the Armada Perdana FPSO vessel for US$40m (RM167.2m) to Century Energy Services Limited (CESL). CESL plans to redeploy the vessel to another field in Nigeria.

• The purchase consideration will be paid as such: - A deposit of US$4.5m was paid and another US$1m will be paid by end-2019 - US$11.6m will be used to settle amounts owing by Bumi Armada to CESL - US$5m within 6 months after the vessel is delivered of when oil is first produced - The remaining US$17.9m within 2 years from first oil

• Disposal gains of US$5m will be recognised in FY19 while the unpaid portions will be recognised when the funds are received.

• To recap, the Armada Perdana FPSO has been out of contract in Nigeria since its previous charterer, Erin Petroleum filed for bankruptcy.

Earnings Outlook/Revision

• We are positive on the deal as it will monetize assets to reduce debt and cost.

• Forecasts maintained – We are keeping our core EPS forecast for FY19 and FY20 as the chunk of the disposal consideration would only come in much later.

• Steady orderbook – Orderbook remains steady at RM18.9b (FPO: RM17.9bn, OMS: RM1bn) another RM9.9bn worth of potential extension. This will sustain the group’s revenue for the next few years.

Valuation & Recommendation

• Maintain BUY call with an unchanged target price of RM0.47 based on +1 SD to its 3-year average P/B. 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 and judgement is expected in 4Q19.

Source: JF Apex Securities Research - 10 Sept 2019