Results

• Improved earnings - Bumi Armada’s 1Q22 PATAMI rose 17% YoY to RM185.8m due to lower depreciation (dormant FPSO Armada Claire was fully depreciated in Dec 2021), lower finance costs (-16% YoY to RM85m due to debt repayment) and higher contribution from JVs.

• Slight revenue decline – 1Q22 revenue decreased 2% YoY to RM529m due to lower revenue from offshore marine services after the disposal of four offshore support vessels (OSV).

• Better QoQ – Compared to the previous quarter, 1Q22 net profit rose 27% QoQ due to higher sales and lower depreciation. Quarterly revenue increased 3% QoQ as due to higher vessel availability for Armada Kraken FPSO.

• Exiting the OSV market – Four OSVs were sold in 1Q22 including three ice vessels. This is in line with the management’s direction to exit the OSV segment and Bumi still has 3 OSV vessels under its fleet.

• Higher margin – Operating margin improved to 48% from 39% in 4Q21 due to lower operating cost and depreciation.

• Steady orderbook – Orderbook was steady at RM13.2b with potential extension worth RM9b. 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. Bumi continues to bid for new FPSO jobs while the dormant FPSO Armada Claire will be sold or scrapped this year.

Earnings Outlook/Revision

• Within expectation – 1Q22 net profit of RM186m achieved 27% of our full year forecast while quarterly revenue of RM529m makes up 19% of our FY22 forecast.

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

• Lower gearing – Net debt was reduced to RM5.7b from RM6.1b in 4Q21 after the company repaid borrowings of RM447m in 1Q22. This effectively reduced net debt to equity from 1.76x in 4Q21 to 1.52, the lowest since 2015.

Valuation & Recommendation

• Upgrade to BUY with an unchanged target price of RM0.53 as share price decreased in the past few months. Our target price is based on its base a +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 continuous effort to lower gearing.

Source: JF Apex Securities Research - 26 May 2022