Results

• Decline in earnings - Bumi Armada’s 4Q21 reported PATAMI declined 18% YoY to RM118m while PATAMI before impairment dropped 14% YoY to RM147.1m due to losses from discontinued operations after the sale of three ice vessels.

• Revenue declined – 4Q21 revenue decreased 11% YoY to RM527m due to lower contribution from Floating Production & Operation (FPO) (-10% YoY to RM480m) and the decline in Offshore Marine Services (OMS) (-45% YoY to RM33m) after the sale of the vessels.

• Lower QoQ – Compared to the previous quarter, 4Q21 reported net profit dropped 23% QoQ due to losses from discontinued operations while normalised PATAMI dropped 8% QoQ due higher operating costs and lower other income. Quarterly revenue decreased 3% QoQ as FPO revenue rose 2% QoQ while OMS revenue slipped 28% QoQ after the disposal.

• OSV asset sale – Three ice vessels were sold in 4Q21 with a profit of RM2.5m while another three were sold in 1Q22 for RM187m. This is in line with the management’s direction to exit the OSV segment and Bumi still has 4 OSV vessels under its fleet.

• Slower margin – Operating margin decreased to 38% from 41% in 3Q21 due to lower margins from both FPSO (54%) and loss in OMS (-39%).

• Steady orderbook – Orderbook was steady at RM13.6b with potential extension worth RM8.9b. The FPSO orderbook can sustain the group’s earnings for the long term with three FPO contracts expiring in 2024-2025 while another four contracts are in longer tenure.

Earnings Outlook/Revision

• Within expectation – FY21 reported net profit of RM574.1m was its highest since listed in 2011 while normalised net profit of RM713m (+48% YoY) achieved 100% of our full year forecast while twelve months revenue of RM2.25b (+1% YoY) is short of expectation after accounting for 85% of our FY21 forecast.

• Forecasts kept – We are keeping our EPS forecasts for FY22 and FY23.

• Lower gearing – Net debt was reduced to RM6.1b from RM6.5b in 3Q21 after the company repaid borrowings of RM482m in 3Q21. This effectively reduced net debt to equity from 1.96x in 3Q21 to 1.76x, the lowest since 2015.

Valuation & Recommendation

• Downgrade to HOLD from BUY with an unchanged target price of RM0.53 as share price increased last year and closed to our fair value. Our target price is based on +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 - 28 Feb 2022