Results

• Higher earnings - Bumi Armada reported 4Q20 PATAMI of RM144m compared to a net loss of RM235m in 4Q19 thanks to lower operating and administrative costs, lower finance costs and lower tax. Excluding an impairment of RM26.8m on it offshore support vessels (OSV), normalised PATAMI rose 4 folds to RM170.9m from RM42.1m in 4Q19.

• Steady revenue – 4Q20 revenue increased 19% YoY to RM616m due to higher contribution from Floating Production & Operation (FPO) (+27% YoY to RM532m) due to higher vessel availability for Armada Kraken. This cushions the decline in Offshore Marine Services (OMS) (-13% YoY to RM84m).

• Better QoQ – Compared to the previous quarter, 4Q20 reported and normalised net profit grew 68% QoQ and 68% QoQ respectively on the back of a 9% QoQ revenue growth as FPO revenue increased 13% QoQ while OMS revenue decreased 11% QoQ due to lower vessel utilisation rate.

• Sterling performance – For FY20, Bumi Armada reported a PATAMI of RM125.6m. Excluding total impairment of RM357.3m, FY20 PATAMI stands at RM482.9m, registering a 44% YoY growth. FY20 revenue grew 13% YoY to RM2.34b with higher contribution from FPO (+4% YoY to RM.99b) and OMS (+8% YoY to RM54m).

• Strong orderbook – Orderbook remains healthy at RM16b (FPO: RM15.2bn, OMS: RM0.8bn) with another RM9.7bn worth of potential extension. This will sustain the group’s revenue for the next few years.

Earnings Outlook/Revision

• Within expectation – FY20 normalised net profit of RM312m achieved 114% of our full year forecast of RM424.8m while twelve months revenue account for 98.4% of our FY20 forecast.

• Forecasts maintained – We are keeping our revenue estimate and EPS forecasts for FY21.

• Gearing concerns – Total debt was reduced to RM8.31b after the company repaid RM349.8m in 4Q20. Bumi recently secured extension of its Tranche 1 corporate loan final maturity from May 2021 to November 2022.

• Monetising assets - The management intends to exit the OSV business and dispose its assets but COVID-19 travel restrictions have deterred interested buyers from inspecting the vessels.

Valuation & Recommendation

• Downgrade to HOLD with an unchanged target price of RM0.42 based on its base 3-year average P/B following the recent run-up in share price.

Source: JF Apex Securities Research - 1 Mar 2021