KEY INVESTMENT HIGHLIGHTS

• Bumi Armada’s 1QFY20 normalised earnings grew by +31.7%yoy to RM90.4m

• Better revenue from Armada Kraken FPSO cushioned lackluster OMS performance

• No new sale of OSV vessels during the quarter

• Current orderbook at RM18.0b, with optional extensions worth up to RM10.3b

• FY20-21F earnings estimates maintained

• Maintain BUY with a unchanged TP of RM0.56 per share

BAB’s 1QFY20 normalised earnings grew +31.7%yoy to RM90.4m. Bumi Armada Berhad’s (BAB) 1QFY20 reported earnings came in at -RM219.5m. However, its normalized earnings - excluding one-off impairment on its OMS business of RM314.4m; came in at RM90.4m which was within our and consensus’ full-year earnings estimates at 27.7% and 30.2% respectively. Comparing against 1QFY20, revenue was higher by +12.4%yoy whilst earnings grew by +31.7%yoy respectively. Meanwhile on a sequential quarter basis; revenue grew by +7.2%qoq whilst earnings surged by +112.8%qoq respectively. This was primarily attributable to: (i) improved vessel availability of Armada Kraken FPSO; (ii) higher OSV utilization rates at 56% in 1QFY20 vs 54% in 4QFY19 as well as; (iii) lower operating costs from Armada Olembendo in 1QFY20.

FPO (previously FPSO & FGS) segment. The segment’s revenue grew by +8.6%yoy mainly attributable to higher contribution from Armada Kraken FPSO arising from improved vessel availability coupled with lower operating costs from Armada Olembendo and Armada Perdana – which was sold back in September 2019. Correspondingly, segment operating profit grew by +21.1%yoy to RM263.5m due to the better revenue recognition. Similarly, on a quarterly sequential basis; the segment’s revenue and profit increased by +10.2%qoq and +35.5% respectively mainly due to gains arising from translation of intercompany balances denominated in foreign currencies.

OMS segment. The segment revenue showed improves performance with revenue growing by +21.1%yoy to RM263.5m. This was mainly due to the improved vessel utilization rate during the quarter which has risen to 56% from 39% back in 1QFY19. However, the segment made a loss of -RM362.1m after it recognizes a non-cash impairment of RM314.4m on the OMS business given the adverse outlook for the segment due to the low oil price as well as the pandemic situation which is expected to result in disruption in demand for vessel charters and rates. That said, excluding the impairment, the segment made a loss of RM47.7m. Additionally, there were no vessels sold during the quarter. Hence, its total vessels remain at 32.

Source: MIDF Research - 1 Jun 2020