Bumi Armada's 1QFY12 results were below consensus and our expectations. The poorer-than-expected results were mainly due to lower vessel utilisation arising from unplanned maintenance on its 2 workboats and a weaker USD against MYR. Hence, we are downgrading our FY12-13 earnings forecasts by 15%-17%. Maintain Neutral, by with a lower fair value of RM4.16 (previously RM4.37).
Below expectations.Bumi Armada's 1QFY12 results were below consensus and our expectations, making up 15% and 16% of our forecasts. Both the 1QFY12 revenue and net profit of RM335.1m and RM89.7m dropped by 9.6% and 28.1% q-o-q respectively due to lower vessel utilisation arising from unplanned maintenance for its 2 workboats and the weaker USD against MYR. However, on a YTD comparison, although the revenue was down by 10.9%, the net profit rose 9.3%, boosted by improved average fleet utilisation, higher contribution from the transport and installation division, as well as robust margin due to the variation order on its oilfield services project in relation to the Sepat FSO.
Downgrading FY12-13 earnings forecasts by 15%-17%. Our downgrade is in line with the poorer-than-expected 1QFY12 results as well as anticipated difficult operating environment due to lingering fears over Europe's protracted economic woes. As Bumi Armada is a global O&G player, we think that the group would not escape some form of negative impact from Europe's fallout.
Maintain Neutral.We are downgrading our fair value for Bumi Armada to RM4.16 (previously RM4.37), based on the existing sum-of-parts valuation following our FY12-13 earnings downgrade. Nevertheless, we continue to believe that the group's strength lies in being able to provide one-stop solutions, starting from the O&G exploration stage to decommissioning. Also, with more than 70% of its business provides recurring income and generates a constant cash flow, this will help the group weather the currently tough global economic conditions.