BAB has received Afren Energy’s notification of a bareboat charter – as well  as  operations  and  maintenance  services  –  contract  extension  for the former’s Armada Perkasa FPSO. This 2-year MYR221m extension is part  of  its  current  MYR7bn  orderbook,  which  will  potentially  expand when new contracts are secured going forward. Thus, we maintain our BUY call, with our SOP-based MYR 4.50 FV unchanged.

Extension  worth  MYR221m.  BAB  announced  that  Afren  Energy Resources Ltd (Afren Energy) has extended its contracts for a bareboat charter with Armada Floating Solutions Ltd as well as the operations and maintenance services with Bumi Armada (Singapore) Pte Ltd in respect of  the  Armada  Perkasa,  a  floating  production,  storage  and  offloading (FPSO)  vessel  for  two  more  years.  Both  companies  are  wholly-owned subsidiaries of BAB. The extension period will commence on 1 July 2014 and is worth around USD68m (MYR221m) in total. The Armada Perkasa, which was deployed to offshore Nigeria in the Okoro-Setu field, has the capacity to store 360,000 barrels of oil.

Taking  up  second and  third  extension  options.  The  original contract was awarded in 2007 and took effect from 1 July 2008. It was for a fixed period  of  five  years,  with  five  1-year  extension  options.  The  first  option period  was  exercised  last  year  and  took  effect  from  1  July  2013. Inclusive  of  option  extension  periods,  as  at  October,  BAB’s  total orderbook stands at around MYR7bn.

Maintain  BUY,  MYR4.50  FV.  We  keep  our  FY13/14/15  earnings estimates unchanged, as  we  have  taken  into  account  the option  for  the contract’s  extension  into  our  forecasts.  Maintain  BUY,  with  an unchanged  SOP-based  FV  of  MYR4.50.  We  believe  that  investors should accumulate the stock ahead of potential contract wins for projects that  have  been  long  delayed,  namely  the  Madura  FPSO  vessel  charter contract.  We  are  also  anticipating  more  details  of  the  Kraken  oil  field 
FPSO  contract.  As  such,  there  is  still  more  upside  to  our  FY14/15 earnings estimates.

Source: RHB