Results

• Into the red - Bumi Armada posted a net loss of RM235m in 4Q19 compared with a net loss of RM1.26b in 3Q18 due to non-cash impairment loss of RM234m (booked under cost of sales) related to the Woodside court case and vessels impairment of RM44m. Normalised profit stands at RM10.3m (-70% YoY) after excluding other operating income of RM31.8m.

• To recap, last month the Supreme Court of Western Australia dismissed Bumi Armada’s case against Woodside Energy after the latter cancelled the Armada Claire FPSO contract. The management will be appealing the judgement.

• Lower revenue – 4Q19 revenue declined 11% YoY to RM515.6m as the growth in Floating Production & Operation (FPO) (+10% YoY to RM419.5m) was unable to cushion the decline in Offshore Marine Services (OMS) (-51% YoY to RM96.1m.

• Poorer QoQ but OMS improved – As compared to the previous quarter, 4Q19 normalised net profit dropped 86% QoQ on the back of a 2% QoQ revenue decline as FPO revenue declined 8% QoQ (due to lower charter revenue from Armada Kraken FPSO) but on the bright side, OMS revenue increased 30% QoQ.

• Healthy orderbook – Orderbook remains healthy at RM17.5b (FPO: RM16.6bn, OMS: RM0.9bn) with another RM9.8bn worth of potential extension. This will sustain the group’s revenue for the next few years.

Earnings Outlook/Revision

• Below expectation – 2019 normalised net profit of RM194.3m (-10% YoY) achieved 73% of our full year forecast of RM2664.7m while twelve months revenue dropped 14% YoY to RM2.07b and achieved 90% of our FY19 forecast.

• Forecasts reduced – We are lowering our revenue and EPS forecasts for FY20 by 19% and 19.5% respectively.

Valuation & Recommendation

• Maintain HOLD with a lower target price of RM0.37 (previously RM0.50) based its base 3-year average P/B, which is reduced from +1 SD due to lower oil prices and cautious outlook in the oil and gas industry.

Source: JF Apex Securities Research - 28 Feb 2020