Results

• Higher earnings - Bumi Armada reported 2Q21 PATAMI of RM139.9m, rising 17% YoY, thanks to lower finance costs, higher other operating income, higher contribution from JVs and tax reversal. Excluding an impairment of RM104m on 8 offshore support vessels and RM12m gain from sale of two vessels, 2Q21 normalised PATAMI doubled YoY to RM243.6m.

• Steady revenue – 2Q21 revenue increased 1% YoY to RM615.6m due to higher contribution from Floating Production & Operation (FPO) (+2% YoY to RM533.1m) despite shutdowns of Armada Kraken and Armada Sterling 3. This cushioned the decline in Offshore Marine Services (OMS) (-4% YoY to RM82.5m) due to higher utilisation rate of 70% vs 44% in 2Q20.

• Better QoQ on normalised profit – Compared to the previous quarter, 2Q21 reported net profit dropped 14% QoQ due to the RM103m impairment. Excluding the impairments, normalised PATAMI grew 50% QoQ. Quarterly revenue increased 9% QoQ as FPO revenue rose 8% QoQ while OMS revenue increased 22% QoQ.

• Lower orderbook – Orderbook was lower at RM14.9b (FPO: RM14.5bn, OMS: RM0.4bn) vs RM15.8b in 1Q21 due to dwindling OMS orderbook as the group plans to exit the OMS segment. The FPSO’s orderbook could sustain the group’s revenue for the next few years.

Earnings Outlook/Revision

• Above expectation – 1H21 normalised net profit of RM406.4m achieves 84% of our full year forecast of RM484.7m while six-month revenue is within expectation after accounting for 45% of our FY21 forecast.

• Forecasts lifted – We are raising our EPS forecasts for FY21 and FY22 by 47% and 29% respectively to account for the higher other operating income, higher contribution from JVs and lower expected tax rate while revenue estimates are maintained.

• Lower debt – Total debt was reduced to RM9.35b from RM9.71b in 1Q21 after the company repaid borrowings of RM398.3m in 2Q21. Trade receivables increased 30% to RM622m mainly due to delayed collection from a client but management noted that payment has been received in July 2021.

• Monetising assets - The management intends to exit the OSV business by year-end and has 14 vessels remaining for sale.

Valuation & Recommendation

• Upgrade to BUY from HOLD with a higher target price of RM0.55 (previously RM0.42) based on +1.5 std dev on its 3-year average P/B and FY22F BVPS.

Source: JF Apex Securities Research - 30 Aug 2021