Results

Higher earnings - Bumi Armada’s 3Q21 PATAMI rose 79% YoY to RM153.4m while PATAMI before impairment surged 57% YoY to RM59.6m thanks to lower finance costs and higher contribution from JVs.

Flat revenue – 3Q21 revenue decreased 3% YoY to RM545.7m due to flat contribution from Floating Production & Operation (FPO) (+0.4% YoY to RM472.2m) and the decline in Offshore Marine Services (OMS) (-22% YoY to RM73.5m).

Lower QoQ – Compared to the previous quarter, 3Q21 reported net profit rose 10% QoQ. Excluding the RM103m impairment in 2Q21, normalised PATAMI dropped 34% QoQ due to lower contribution from JV and associates, absence of tax reversal and lower minority interest. Quarterly revenue decreased 11% QoQ as FPO revenue fell 11% QoQ (due to an unplanned shutdown on Armada Kraken FPSO while OMS revenue slipped 11% QoQ.

Improved margin – Operating margin increased to 44% from 28% in 2Q21 due to improved margins from both FPSO (71%) and OMS (30%).

Steady orderbook – Orderbook was steady at RM14.6b (FPO: RM14.0bn, OMS: RM0.6bn). The FPSO orderbook can sustain the group’s revenue for the next few years while OMS orderbook will continue to decline as Bumi exits the segment. Four OSV vessels were sold for RM5.8m with 10 vessels left in the fleet.

Earnings Outlook/Revision

Within expectation – 9M21 normalised net profit of RM406.4m achieved 79.5% of our full year forecast of RM712m while nine months revenue is within expectation after accounting for 65% of our FY21 forecast.

Forecasts reduced – We are keeping our EPS forecasts for FY21 but reducing our FY22 estimates by 12.3% due to the windfall tax announced during Budget 2023.

Lower gearing – Net debt was reduced to RM6.5b from RM6.9b in 2Q21 after the company repaid borrowings of RM422m in 3Q21. Trade receivables decreased 22% to RM488m mainly due to higher receipts from customers and lower revenue recognised for Armada Kraken FPSO.

Valuation & Recommendation

Maintain BUY with an unchanged target price of RM0.55 which is close to its +1.5 std dev on its 3-year average P/B and FY22F BVPS. We expect prospects to improve given the elevated oil price and Bumi’s lower gearing.

Source: JF Apex Securities Research - 22 Nov 2021