Bumi Armada has secured contracts to provide three newbuild vessels to service Lukoil’s offshore platforms in the Filanovsky field in Caspian Sea for a period of 10 plus 20 years. We maintain our BUY call, with a higher SOP-based FV of MYR4.50 (from MYR4.40) to reflect the contribution of these contracts. We expect the Kraken FPSO contract to be earnings accretive when the relevant details are disclosed.

Three new vessels contracted to Lukoil. Lukoil-Nizhnevolzhskneft LLC (Lukoil) has awarded BAB contracts to provide three new Ice-Class vessels to service offshore platforms in the Filanovsky field in the Caspian Sea, Russia by Nov 2015. The contracts, each of which is for a period of 10 years, is worth a combined USD262m (MYR844m), with an extension of up to 20 years worth USD483m (MYR1.56bn). The three vessels comprise two newbuild Ice-Class (Arc 4) support vessels and a multipurpose duty-rescue Ice-Class (Arc 5) vessel that can carry out: i) cargo and personnel delivery, ii) salvage, search and rescue functions, iii) fire-fighting operations, iv) towing, and v) tanker mooring.

Interim contract pending delivery of newbuild vessels. Meanwhile, BAB has also signed an interim contract with Lukoil worth USD18m (MYR59m) to provide two support vessels and one rescue vessel, pending the delivery of the newbuilds. Under the interim contract, the vessels will be deployed to the Filanovsky field by November next year.

Awaiting more details on Kraken FPSO. We understand from the management that the details on the Kraken field’s floating production, storage and offloading (FPSO) unit may be unveiled next week as the contract is scheduled to be signed on 12 Dec. We expect contributions from the Kraken FPSO to be earnings accretive from FY14 onwards.

Maintain BUY, with new MYR4.50 FV. We bump up our FY14 and FY15 earnings estimates by 1% and 3% respectively to reflect contributions from the Lukoil contracts. Accordingly, we revise higher our SOP-based FV to MYR4.50 from MYR4.40, and maintain our BUY call on the stock.

Source: RHB