INVESTMENT HIGHLIGHTS

• Bumi Armada (BAB) signed bare boat charter for FPSO Armada TGT1 with Hoang Long JOC

• Contract value worth USD285m (approx. RM1.16b)

• Duration for six years

• Termination option in place after 2021

• Maintain Trading Buy with unchanged TP of RM0.90

New contract for Armada TGT1. BAB signed a bare boat charter contract with Hoang Long Joint Operating Company (HLJOC) for the charter of FPSO Armada TGT 1 with a firm charter period from 27 August 2018 until 14 November 2024 with a contract value of USD285m (approximately RM1.16b).

Background of contract. This new signing is a continuation of an existing contract signed with HLJOC back in 1 September 2009 for a period of seven years with extension options. This new contract however, now incorporates a termination option to HLJOC in an event that the production of Block 16-1, Vietnam falls below an economic level, without any termination fee.

Impact on earnings. No impact to earnings forecasts as new wins within estimates.

Orderbook. The company’s latest orderbook as at 31 March 2018 stands at RM26.2b compared with RM22.3b as at 31 December 2017. 95% of the orderbook consists of FPO contracts (RM24.8b) while the remaining 5% are OMS jobs (RM1.4b). The optional extension orderbook stands at RM11.1b.

Maintain Trading Buy. The recent broad market decline presents buying opportunity for BAB. We are of the opinion that: (i) company fundamentals remain intact; (ii) FPSO projects poised to pick up in FY18 and FY19 and; (iii) earnings stability seen in FY18. We are maintaining our TRADING BUY recommendation with an unchanged TP of RM0.90 per share to take advantage of the share price decline and the trading opportunity for recovery. Our valuation is based on PER19 of 15x pegged to EPS19 of 5.9sen.

Source: MIDF Research - 6 Aug 2018