This article first appeared in The Edge Financial Daily, on January 4, 2016.
Bumi Armada Bhd
Despite reporting a drop in its net profit in its latest quarterly results, analysts see value in Bumi Armada Bhd (BAB), based on the offshore oilfield service provider’s upcoming delivery of its new floating production storage and offloading (FPSO) projects in the coming years.
Maybank Investment Bank Bhd said it expects a significant jump in BAB’s earnings in 2017, driven by the conversion of four FPSO vessels, namely Kraken, Eni, Madura and Malta, which are likely to be delivered in 2016 and 2017.
It is also worth noting that the company has secured a US$1.12 billion (RM4.82 billion) syndicated facility to part-finance the provision of a FPSO vessel, which is to be chartered to Eni.
“We expect a significant 3.6 times year-on-year jump in BAB’s earnings in 2017 should these projects be smoothly executed,” said the research house.
It added that the company is also bidding for two key jobs in Vietnam and Brazil to ensure sustained growth beyond 2018.
Maybank has a “buy” rating on BAB, with a target price of RM1.20.
Meanwhile, Macquarie Equities Research highlighted the stable income generation from BAB’s ongoing FPSO leases and the group’s established presence in the Caspian Sea transportation & installation segment.
“Once commissioned, an FPSO provides [a] recurring cash flow to its owner throughout the lease tenure with minimal cancellation risk. Macquarie estimates BAB’s six units of operating FPSO to underpin over 40% of its 2016 profit before tax (PBT) and 30% of 2017 PBT,” it said.
According to Bloomberg data, the counter fell 38.8% from 2015’s high of RM1.283 on June 4 to the year’s low of 78.5 sen on Aug 25. In 2015, BAB fell 5.1%, underperforming the FBM KLCI, which fell 3.44% during the same period.
BAB closed two sen or 1.92% lower at RM1.02, giving it a market capitalisation of RM6.1 billion.
http://www2.theedgemarkets.com/my/article/stock-picks-2016-bumi-armada
