INVESTMENT HIGHLIGHTS

• Bumi Armada’s (BAB) 1QFY19 reported earnings rose by +28.5%yoy to RM62.2m

• Normalised 1QFY19 earnings at RM68.6m

• Firm orderbook stands at RM29.1b

• OSV utilisation rate in 1QFY19 remained flat at 39%

• Upgrade to BUY with a revised TP of RM0.32 per share

Normalised earnings above estimates. BAB’s 1QFY19 reported earnings rose +28.5%yoy to RM62.2m. This is despite a -14.7%yoy decline in its revenue. Excluding exceptional items i.e. impairment of RM6.4m; BAB’s normalised earnings was flat year-over-year at RM68.6m. This was above ours but within consensus’ FY19 full-year earnings estimates. The stronger earnings showing is attributable among others to: (i) higher share of results from Karapan Armada Sterling III arising from lower tax expense; (ii) lower management fees recognised during the quarter and; (iii) impairment losses on Armada Kraken recognised during the same quarter last year.

FPO (previously FPSO & FGS) segment. Segment revenue was down -7.6%yoy at RM425.6m while segment profit declined by - 11.0%yoy to RM253.7m. The lacklustre numbers is largely attributable to lower revenue from Armada TGT FPSO after signing the extension agreement and Armada LNG Mediterrana FSU.

OMS segment. The Offshore Marine Segment (OMS), an amalgamation of the offshore support vessel (OSV) remains in the red with its revenue declined by -52.8%yoy to RM66.0m while profits was registered at only RM9.0m. This is mainly due to the completion of the LukOil project in the Caspian Sea back in December 2018. Combined OSV utilisation rate remained flat at 39% in 1QFY19 compared with 38% in 1QFY18.

Impact on earnings. Due to the better-than-anticipated earnings as well as internal cost initiatives that is bearing fruit; we are revising our FY19F and FY20F earnings up to RM225.4m and RM238.5m respectively.

Orderbook. The company’s latest orderbook as at 31 March 2019 stands at RM21.0b compared with RM20.2b as at 30 June 2018. 66% of the orderbook consists of firm contracts (RM19.3b) while the remaining 34% are optional extensions (RM9.8b).

Source: MIDF Research - 28 May 2019