THE BUZZ  

Bumi Armada (BAB) announced on Bursa Malaysia yesterday that its subsidiaries have secured five contracts  ' one in Gabon, two in the Republic of Congo and two in Saudi Arabia ' worth approximately RM147m, with an optional extension value of RM102m.

OUR TAKE  

Accommodation  workboat  chartered  to  support  Total  Gabon's  offshore operations in Gabon. The contract in Gabon entails the charter of an accommodation workboat, namely Armada Firman 2 to Total Gabon (a Gabon-based company which is part  of  the  Total  SA  group)  worth  approximately  RM12m  for  an  initial  period  of  three months,  with  extension  options  of  three  periods  of  one  month  each  for  a  further aggregated contract value of RM11m. The charter contract is the first for BAB in Gabon. 

Two contracts for deployment in Congo. BAB secured another contract from ENI, the ltalian national oil company, for the charter of an anchor handling towing support vessel (AHTS),  namely  Armada  Tuah  82,  which  is  expected  to  be  deployed  off  the  shores  of the Republic of Congo in the first week of Dec 2012. The contract, worth approximately RM36m,  is  for  a  period  of  two  years  with  two  optional  extension  periods  of  one  year each  for  a  further  aggregated  contract  value  of  RM35m.  The  other  contract  from Diamond  S.A  is  for  the  charter  of  an  accommodation  work  barge,  namely  Armada Hibiscus, worth RM56m for a period of two years with extension options of two periods of one year each for a further aggregated contract value of RM56m.

Two  contracts  for  deployment  in  the  Arabian  Gulf/Red Sea.  BAB  also secured  two contracts from Rawabi Swiber Offshore Marine (Singapore-based JV company between Rawabi  Holdings  and  Swiber  Holdings)  for  the  charter  of  an  anchor  handling  towing support vessel (AHTS) each, namely Armada Tuah 84 and Armada Tuah 85, to operate within the Saudi Arabian waters in the Arabian Gulf or Red Sea. The contracts are worth approximately RM43m for a period of one year each.

Positive for FY12 and FY13 earnings. We are taking the opportunity to raise our FY12 and FY13 earnings forecasts by 3.1% and 11.5% respectively to incorporate the higher potential earnings from its offshore support vessel (OSV) division. We are forecasting a
net profit of RM402.3m in FY12 and RM543.1m in FY13.

Maintain BUY. In line with our timely upgrade from a NEUTRAL to a BUY yesterday, we are  convinced  that  FY13  will  be  a  good  year  for  the  group  if  it  is  able  to  sustain  the momentum  in  securing  new  contracts.  Our  FV  is  revised  upwards  from  RM4.15  to RM4.35,  based  on  our  sum-of-parts  valuation  due  to  our  earnings  revision.  The  stock currently trades at 19.9x FY13 earnings, which we think is attractive. That said, we are still concerned with the likelihood of major shareholders paring down their stakes  in the group in the near term.

Source: OSK