EPF selling, with the absence of foreign funds buying, means that retailers have the opportunity to buy at low price.

Don't panic sell, buy and hold it.

I have entered 2 years ago at RM0.75, have averaged it down to RM0.5x now.
Still holding.

Let time be your most powerful weapon against institutional funds who have to do daily monthly quarterly reporting on their stock positions and do not have the luxury of time and holding power.

Some forumer mentioned earlier that EPF was selling to generate dividends for PH govt to plug fiscal hole.

But actually they didn’t sell a lot last week only around 1% of their holdings. But Armada is not very liquid like Sapura so the price went to shit.

Anyway, Armada is way too undervalued now. When you buy and hold and have a few months horizon, pretty high chance to make some good money.

+2.2% closing - first rebound after 8 consecutive days of losses.
Let's hope this keeps up.

As usual, I'm holding out till the Q3 report comes out, which is likely to be good, given that non-cash impairment and kitchen sinking is done abnormally early in Q2 and all 4 FPSOs have received final acceptance and are contributing to earnings.

You're welcome to sell if you're holding Armada.
Also, Not quite sure why you're advertising for the property stocks in an O&G stock forum.

If you don't hold Armada's share, and don't intend to buy the shares when it goes even lower, then I'm not sure what is your purpose and intention of posting on this forum.

Of course, you may be a good samaritan and are all the more entitled to voice your opinion objectively, but when you resort to personal attacks such as "u all some more talk rubbish", then I'm pretty sure no one would welcome that.

Hopefully, EPF stops selling this week (announcements so far is until last Thursday the bloodbath week). Then we have a chance of a good recovery.

Agreed. Almost 0% chance for rights issue at this price point. No company does rights issue when their share price is at an all time low - not even Sapura when they were at 0.395 all time low at one point. They waited until share price went back to 0.6-0.8 to do it when sentiment is better.

Also, Armada is quite different from Sapura in terms of earnings resilience. There is a lot of clarity and stability in Armada’s long term FPSO cash flow, whereas Sapura is on a short term job basis. Hence, no way that the debt restructuring will fail and trigger a cash call.

macro tailwinds look strong today.
regional markets all up, foreign selling has subsided.

Thanks, I think rights issue will only be used as a last resort, and only in the event that:

1) There's a highly profitable new contract that Armada can imminently win, or
2) The bankers call on the short term debt and not allowing them to be restructured into long term debt.

While I can't say for sure that 100% the above will not happen, but the likelihood is very low.

That said, within the time frame of my investment with Armada - around 2 years plus, I have more often been wrong with the price direction than I was right (hence my losses and need to average down). So, as usual, just my opinion.

To recap, as at June 2018, Armada has RM6.22 billion in ST debt, and RM4.83 billion in LT debt.

It's quite unusual to see ST debt being significantly higher than LT debt, but to cut long story short, this was mainly because of the delay in final acceptance of Kraken earlier, so the debt was reclassified from LT to ST.

Armada is in the process of reversing this.

Amongst the RM6.22bn ST debt, these can be broken down into 3 components:

1) RM1.95bn - Armada Kraken term loan (in the process of being reclassified to LT)
2) RM1.35bn - Revolving credit facility (this can be rolled over as long as you pay interest)
3) RM2.92bn - Other term loan

So what we really need is more clarity on # 3), on how Armada plans to refinance the RM2.92bn.

There is definitely a mismatch between asset cashflow and debt repayment cashflow here. Armada's FPSO's assets are generally long term cash generating assets with average of >10 years of cashflow profile, but RM2.92bn due in 12 months represents almost 30% of total debt of RM11bn (at this run rate it means that Armada needs to repay all its debt in 3 years+ which doesn't make sense at all).

This is where I think the management/board of directors fucked up - the heavy mismatch between debt repayment and cashflow profile of underlying assets.

However, I wouldn't blow this issue out of proportion because the lenders will likely just allow Armada to refinance its debt to a longer tenure to match its cashflow profile. This is very common for many companies in fact. One reason I could think of is that Armada entered into perhaps a 5 year term loan with banks to back a 10 year project, with the understanding with the banks that when the time comes 5 years later, they can refinance the loan for another 5 years to match project cashflow. Of course, the banks will only refinance it if the execution doesn't fuck up - e.g. achieving the final acceptance etc. (which Armada has achieved all). This is why I think refinancing the debt will not be an issue, especially since Armada has never defaulted on any interest or principle repayments to banks.

Like RJ87 mentioned, it's best to cut opex to maximize cashflow to pare down debt over time.
This is the best way to create equity value to shareholders - to deleverage.

Selected extract from 2Q 2018 quarterly report, Page 22:

"The Group is currently in active discussion with the lenders to refinance these unsecured term loans by October 2018.

In addition to refinancing the unsecured term loans, the Group is taking the following measures to strengthen its cash flow position:
• Completing the final drawdown of remaining project financing from existing facilities;
• Considering ongoing proposals for the monetisation of assets; and
• Pursuing collections from customers."

Hopefully, we get some news by end of the month on the progress of refinancing short term debt to long term.

The most crucial thing is that we have the following confirmation now:

1) No rights issue in the plan
2) Debt restructuring from ST to LT work in progress

With this, the company specific risk has been removed.
Only macro risks remaining - trade war, oil price, rate hikes, PH govt policies etc. but these generally affect all stocks.

Rebound imminent. Enter now while you still can.

Absolutely right that the #1 thing to do now is to restructure their debts to long term, and use cashflow generation to repay debt and delever the balance sheet, thereby creating shareholders value.

Sooner or later, with sustained oil price above US$80, OSV demand will be back perhaps end 2019/2020, further strengthening the cashflow and speed of debt reduction.

If they take a defensive position like this, they can still create lots of value for shareholders, and there's no need for rights issuance at all.

Totally agree.

I think some people are selling down on the rumors that Armada acquired the new VLCC for new FPSO contract, and were worried that it could trigger rights issue, hence the share price spiralled down the past few days.

You can also attribute this to management's fault and the shitty investor relations team - the rumor on tradewinds appeared on 10 Oct and they took 6 bloody days to issue a clarification announcement.

So anyway, with this VLCC rumour out of the way, rebound time for Armada finally?

Also, no VLCC purchase implies no FPSO new contract win, hence why is there a need for rights issuance?

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5942713

Announcement is to clarify they did not buy the VLCC vessel as rumored on tradewinds, not rights issuance.

Wah superbull11, proclaiming insider news on rights issuance, whether it’s really true or not, is an offence under law. Careful...

Lol I feel like I read that before.
Topped up 5000 lots at around 0.455.
Will be my last top up.

short sellers are probably targeting armada's weak management and inability to respond, pounding the stock.

management probably laughing at shareholders now.

"i just do what i do best, feign ignorance and keep quiet, and thank you very much for the multi million ringgit paycheck, expat benefits for my entire family, posh housing, nice car. whether stock price RM0.80 or RM0.40, none of my business. When my contract is up, I'm already richer and shall go back to my home country, whether you renew my contract or not"

Kraken production is expected to continue to ramp up.
I think once it reaches 50k barrels of oil per day and is able to produce that amount consistently, the kraken impairment will be written back.

https://www.yourmoney.com/investing/stock-week-enquest/

Reserves have increased quite significantly as the Kraken Field (one of the biggest subsea heavy-oil field projects in the UK) starts production. This is expected to boost Enquests’ production levels in 2018 to between 50,000 and 58,000 barrels of oil per day.

Investors should also be encouraged that the cash flows have improved significantly as a result of ramped up production and this also should help alleviate concerns on the debt level to a certain extent.

https://www.thestar.com.my/business/business-news/2018/10/15/no-inheritance-capital-gains-tax-in-budget/

There will not be capital gains tax on stock market. This is an important implication to get the foreign funds back.

The downward momentum seems to have slowed and the share is consolidating. We need some macro or company specific good news to jumpstart the recovery.

Don’t think rights issue is imminent.
Sapura is issuing rights issue because their borrowing has been maxed out, and they don’t have cash on balance sheet as bid bond for new contracts.
Armada still has 1.3 billion cash and another 6 billion ringgit euro term loan facility indrawn. Doesn’t make sense yet to issue rights issue until all these avenues are exhausted.

Thanks. If zaba zaba is off, then I guess rights issuance is not required? In that case, Armada only needs to restructure its short term debt to long term, and use the strong and stable FPSO cash flow to delever its balance sheet. What it really needs now is an announcement that the debt has successfully been restructured.

EPF has sold 4.5 million shares on 8-10 Oct, when bursa was hit the worst last week.

Lol, where’s the supposed support for domestic market when foreign funds are pulling out due to PH government’s market chilling comments on potential CGT on stock profits?

Anyway, regardless of sentiment, my stance is still such that Armada is severely undervalued at historical low, on the backdrop of high oil price and recovering O&G industry.

Sadly, as undervalued as the stock is (normalized P/E around 7-8x) , the mispricing persists.

Quoting John Maynard Keynes - "the market can remain irrational longer than you can remain solvent"

Without institutional funds or some HNW ballers coming in to correct the mispricing, the share price seems like it's just gradually languishing over time, everyday drop 2-3%.

When oil price at US$40, pending 4 FPSO final acceptances, Armada at RM0.80
When oil price at US$80, all 4 FPSO received final acceptances, Armada at RM0.48

Lol, yes, I know it's wtf, but I guess I'll just painstakingly accumulate more.

If there's a new project, drawing down US$1.5bn Euro MTN + do a rights issue will be a great catalyst for the company. Counterparty is Eni and Shell with solid background although they will need to get over the scandal (i think highlighted by a previous forumer).

The worst thing for the share price is an incompetent management and investor relations team who are so goddamn bad in managing investor's sentiment.

Summary:
lnstitutional guys not touching this stock.
Retail keeps selling.
Management keeps mum on everything.
Panic worsens.
Shit share price.

So, depending on which camp or reasoning you believe more, invest accordingly.
I'll be off this forum till next QR, goodluck!

Haha, for the bullish guys, these could also be spinned into the following 8 reasons:

1) Short term debt could be restructured to long term debt, thereby alleviating liquidity crunch and Armada can continue generating healthy,stable FPSO cashflow to pare down debt over time
2) Net loss in 2Q2018 is one-off, Armada is on the brink of profit turnaround. Q3 results will be sparkling
3) Kraken's impairment was blown out of proportion. Final acceptance was still achieved which is a huge positive for the company with much lower earnings risk. Furthermore, write-back is on the cards if Kraken's technical difficulties can be overcome over the next 1-2 years, and this is provided in the AA2
4) With oil price >US$80 per barrel, upstream oil and gas capex will soon kick start again and OSV will be back in business.
5) Rights issue will be last resort, Armada can still draw down on untapped Euro MTN amounting to US$1.5bn, sell stake in existing FPSO assets which have achieved final acceptance to pare down debt or fund new contract wins.
6) Once budget 2019 by PH government is out, uncertainty is out of the way and investors will come back.
7) Armada Claire redeployment is on the cards in Q1 2019 according to Management, and Armada has a good case against woodside petroleum to win around US$240m from court case, to be decided in 1H2019. This is equivalent to RM0.20 per share uplift according to analyst
8) Front runner for zaba zaba project, will provide the much needed growth catalyst.

Perfectly understandable why people panic sell and the big boys are not coming back yet.
Although I still own a lot of Armada's shares, putting myself into the shoes of those who are bearish, I can think of 8 ways why Armada's share price is so shitty:

1. RM3.5bn current assets, RM7.8bn current liability, there's a RM4.3bn liquidity crunch
2. Massive RM592 million net loss in latest quarter, reversing profitability trend
3. Kraken's underwhelming final acceptance with reduced economics
4. More than 60% OSV fleet still idling doing nothing
5. Balance sheet too levered to bid for new jobs with overhang of rights issue
6. Uncertainty in government policies, investor unfriendly and populist PH government
7. Rise in US interest rate leading to foreign funds outflow from Malaysia
8. US-China escalating trade war

not really, it's more like the buyers very defensively accumulating, hence no volume breakout for it to rocket back up. need someone to break through 0.505 / 0.51 it ain't gonna be me lol.

we need an institutional guy to correct the mispricing!

EPF has stopped supporting the share price for a few weeks and announced 1.17 million shares sold yesterday. But I wouldn't be surprised to see them start buying again.

The PH government is under heavy fire for the crash the past few days due to their comments which led to heavy foreign selling. Actually, it will be a pretty good strategy to announce some seriously worrying news, scaring the shit outta foreign investors, wait for the market to crash, then instruct local big boys like PNB, EPF etc. to buy in at cheap prices. Then after a while announce some good news, everyone likes Malaysia again, prices goes up. Best trash and cash and pump and dump strategy.

If BA indeed purchased a new VLCC - then this would be a positive imo, as bankers are willing to support it with more borrowings.

Typically, in debt agreements - a company needs to adhere to certain financial covenants (e.g. D/E leverage ratio) and agreement from existing bank lenders will be needed for new debt raise.

If Armada could borrow more to purchase the VLCC - this would imply that they have obtained existing bankers approval and support to borrow more, which could also mean that their short term debt (esp Kraken) is possibly restructured to longer term repayment.

However, this is just rumour grade info on the VLCC purchase - nothing is confirmed.

https://www.tradewindsnews.com/tankers/1602200/bumi-armada-tight-lipped-on-fredriksen-vlcc-links

Rumoured that Bumi Armada is the purchaser of a VLCC (very large crude carrier) supertanker. Is this for FPSO conversion? They secured a new project?

It takes quite a lot of panic news to hammer armada down to this price, almost a perfect storm.

-change in government regime
-new potential government tax
-rising US interest rate leading to foreign funds outflow
-kraken impairment (but followed by final acceptance which failed to boost share price back up for whatever reason)
-sudden skyrocketing debt worries by analysts across the street although debt has been there for years

While unfortunate, and as painful as it seems, or some may call it escalation bias, i have continuously averaged down. double fingers crossed, haha.

entered 7000 lots @ 0.522 yesterday
another 3000 lots at 0.490 today.
panic sellers, thank you.

no risk, no gain, fingers crossed

accumulated total 7000 lots today, at average price of 0.522
bursa deep red across the board, probably foreign funds selling heavily

Thanks Valu88. Armada’s about 25% of my portfolio now, yeah you’re right seems a bit overweight. All my other stocks are below 20%. Will rebalance it - black swan does happen haha.

Great, shaking off the paranoids/forced sellings.
Hope got chance to top up more below 0.54 tmrw.

nice, someone just dumped 7-8000 lots at 0.545. please continue dumping at 0.54's 13000+ lots, and clear the pathway for share price recovery.

Once it pushes past 0.555 it will resume a stronger uptrend.

Best 5 bids at 47000 lots vs best 5 sell bids still at 18000 lots
2.6x differential now.

If anyone wants to sell better sell now at 0.545 now's your chance 7000 lots and get it over and don e with please.

Soldier on with the short squeeze.
Short sellers have made way too much money with Armada.
Time for them to get burnt.

Best 5 buy bids at 43000 lots vs best 5 sell bids at 18000 lots.
2.5x differential.