Update

• Bumi Armada’s 49:51 JV company SPBAOPL has received a 10- year bareboat charter lease of the Armada Sterling Floating Production Storage and Offloading (FPSO) vessel in the ONGC D1 field located 200km off the west coast of Mumbai, India. The contract value is US$370m or RM1.54b and comes with an option to extend up to 5 years.

• In related announcement, SPBAOPL also bagged a 10-year operation and maintenance contract of Armada Sterling worth RM520m.

• Armada Sterling has been operating in the area since 2012 and we view the extension positively towards Bumi’s earnings visibility.

• Armada Streling’s contract would lift orderbook to about RM18b. The huge orderbook will provide earnings visibility and sustain the group’s revenue for the next few years.

Earnings Outlook/Revision

• Forecasts maintained – We are keeping our earnings forecast intact as the contract extension was within expectation. The contract extension was supposed to be signed earlier but was delayed due to lockdown.

• Challenges ahead – Gearing remains a concern as the group has to raise cash to repay RM680m of borrowing within 12 months as it faces challenges to monetise assets and dispose OMS and FPO vessels amid travel restrictions due to COVID- 19.

Valuation & Recommendation

• Maintain to BUY with an unchanged target price of RM0.42 based on its base 3-year average P/B.

Source: JF Apex Securities Research - 25 Sept 2020