Below expectations. Bumi Armada's 1HFY12 results came in below consensus and our expectations, making up only 37.2% and 31.0% of our and consensus' full-year forecasts respectively. While revenue shrank 6.4% y-o-y, earnings grew by 27.6% y-o-y due to improved fleet utilization in its offshore support vessel business.

Downgrading FY12 and FY13 earnings forecasts by 20%. Our downgrade is in line with the poorer-than-expected 1HFY12 results as well as on anticipation of a difficult operating environment. Factors such as uncertainties arising from Europe's protracted sovereign debt crisis, political upheavals in the Middle East and sluggish world economic growth will cast a gloom over Bumi Armada's business in the near term.

Maintain NEUTRAL. We are maintain our NEUTRAL recommendation on the stock and revising lower our FV to RM4.15, based on sum-of-parts valuation (previously pegged to FY12 earnings), as we now roll over our valuations to FY13 earnings. While we like the group's standing as a one-stop solutions provider in the oil & gas industry, the difficult operating environment coupled with lingering fears over Europe's protracted economic woes will continue to haunt Bumi Armada in the near term.

Source: OSK