INVESTMENT HIGHLIGHTS

• Bumi Armada’s (BAB) 4QFY17 reported net profit in-line at RM352.2m

• Both business segments maintained operating profitability

• Firm orderbook stands at RM22.3b

• OSV utilisation rate in 4QFY17 struggled at 48%

• Maintain NEUTRAL (with positive bias) with unchanged TP of RM0.85 per share

Profit within estimates. BAB’s 4QFY17 reported earnings sustained in the black for the fourth consecutive quarter at RM63.8m. Excluding gains on disposal of RM16.8m, BAB’s 4QFY17 normalised earnings came in at RM47.0m. The company’s cumulative FY17 reported earnings and normalised earnings (excluding gain on disposals and impairments) came in at RM352.2m and RM257.0m respectively, accounting for 95% of our full year normalised earnings estimates. The company’s earnings however missed consensus estimates by a variance of more than >20%.

FPO (previously FPSO & FGS) segment. Segment revenue nearly quadrupled to RM1.4b while segment profit surged to RM428.7m. The commendable results are attributable to higher contribution from Armada Olombendo FPSO, Armada LNG Mediterrana FSU and supplementary payments for the Armada Kraken FPSO project. The company recorded an average vessel utilisation uptime of 99% for the year.

OMS segment. The Offshore Marine Segment (OMS), an amalgamation of the offshore support vessel (OSV) and Transport & Installation (T&I) segments managed to sustain revenue at RM969.2m (+5.0%yoy) while suffered slight decline of -9.9%yoy in operating profit at RM153.8m. The commendable earnings are a result of a oneoff revenue recognised based on work completed on the LukOil project arising from signing of the supplementary agreement. Utilisation rate declined slightly to 43% in the final quarter of the year.

Impact on earnings. No change to our earnings estimates.

Orderbook. The company’s latest orderbook as at 31 December 2017 stands at RM22.3b compared with RM22.7b as at 30 September 2017. 93% of the orderbook consists of FPO contracts (RM20.7b) while the remaining 7% are OMS jobs (RM1.6b). The optional extension orderbook stands at RM12.5b.

Maintain NEUTRAL. We are maintaining our NEUTRAL (with positive bias) recommendation on BAB with an unchanged target price of RM0.85 per share. Our valuation is based on PER18 of 15x pegged to EPS18 of 5.7sen. With the company’s macro outlook improving and optimism on upstream exploration and production activities, we believe that the FPO segment could benefit positively. However, we still believe that the OMS segment could face further headwinds as the OSV segment (especially the higher brake horsepower vessels) remain in an oversupply state.

Source: MIDF Research - 27 Feb 2018