The FTSE Bursa Malaysia KLCI (FBM KLCI) is set to trade between 1,640 and 1,650 next week, bolstered by window-dressing activities which are expected to kick off then.
It's time for our Armada to breach 40 next week!
On Friday, Mabel P1 Serba Dinamik Battleship climbs +0.23 (13.86%) to close RM 1.89
Let see which one will cross RM 2.00 first, Fossil Fuel Serba or Dayang vs BioFuel FGV Plantation
Oil price is a highly sensitive indicator relative to economy activities. Share prices of oil and energy companies are highly correlated with oil prices. Anticipating global economic recovery by mass vaccination boosted global oil demand. The rally in oil prices boosts bullish mood in oil and energy sectors. The oil still has room to run and armada share price is likely jumping higher.
Jojobaa's analysis as follows posted on 15 October 2020 on this forum:
Armada's days of impairments are over, the 300 mil on the OMS is the last one.
With Armada D1 being extended, the next expiry of charter from firmed period is only coming in 2024. Debts are being paid down from its EBITDA of RM1 billion. Debts only increased because USD had appreciated to USD4.40 as at 1st quarter and USD4.28 as at 2nd quarter. RM1.5 billion has been paid, translating to debt paring down of RM250 million a quarter. Enquest, its customer for Kraken has breakeven field of USD10-15 bucks, so they are still above water, and unless oil price plunge below USD10 for prolonged period of time, chances of them terminating is close to zero.
OMS is loss making, but still EBITDA positive. I read somewhere that Armada Constructor and Installer has assumed no jobs till 2022, so any further impairments before then is slim.
Armada will probably make around RM300-400 million a year here onwards. Management is doing the right thing, paring down debt aggressively and maintaining operational consistency.
I am leaning towards AmInvestment and Hong Leong's target price of RM0.50-RM0.60. Over next few quarters, once it makes 2 consecutive quarters of RM80-100 million profit, Koon Yew Yin's followers will buy as it is trading at 5x and meets his golden rule. Debt is not a problem as they are generating substantial EBITDA. Interest rate reduction of 2% also saves Armada RM50 million in interest cost a year.
CEO said FPSO is immune to oil price. Why? Because before they commit to a project they screen through the profile of clients and primarily the breakeven cost of oil prices. At USD40, most of its clients are still generating positive EBITDA and profit, with breakeven at USD15 and 27 respectively for Enquest, so no oil price will not pose a serious risk to its FPSO business under current conditions. An oil field is drilled after forecasting for 10 or more years and therefore its clients will continue to drill as long as it is generating positive cash flow. Termination of oil field will leave operators cripple as they cannot produce oil clients has to be severely financially distressed to take this step.
Some people are spooked with Maybank IB's valuation. First we have to understand that Maybank has written off approximately RM10 billion of its extension orderbook. This is a very drastic assumption. The recent extension of Armada TGT1 and Armada D1 has shown that not only will clients extend, they are even extending for longer durations (in the case of Armada D1) as oil field may still be producing robustly. Imagine if you just write off RM10 billion off a company's books. I don't see him doing the same on Yinson's orderbook.
Furthermore, Maybank has put a value of zero on the values of its OMS division. This is also not a fair assumption as its OMS division is still EBITDA positive. If an asset is EBITDA positive, it is still generating cash for its owner. The losses relates to the losses relative to the investment made on the assets but Armada has also been selling its OMS assets at gains (meaning sales price exceed book value).
Maybank has essentially valued Armada as if it is not cash flow positive, in financial distress and is at risk to declare bankrupty. I can assure you if you look at the cash flow statement, Armada has kitchen sunk most if not all its legacy investments and is a healthy company generating enough cash flow to pay off its debts and generate earnings for its shareholders.
Positives: 1) Second quarterly profit if RM85 million despite Kraken maintenance downtime for a week (about RM15 million loss of revenue and therefore profit as Armada have to incur expenses during downtime) 2) Another 230 million of debt pared down, bring 9M2020 debt paredown to a whooping RM750 million 3) Steady performance for the FPSO division with the exception of Kraken downtime, which was planned 4) There is an increase of RM13 million in asset held for sale, which means more idle OSV assets are earmarked for sale. This is a good sign as depreciation and operating costs in relation to cold stacking those OSVs can be reduced.
Negatives: 1) Armada issued a force majuere due to construction difficulty during the lockdown for its 30% JV in India. However, force majuere contracts are fairly common in agreements relating to extraordinary events such as natural disaster or in this case COVID that hinders Armada's ability to fulfill its contract obligations (such FPSO construction is fairly complex process). I do not expect a material impact as the force majuere clauses should protect Armada from penalties or claims from OGNC. The only things that moved from this is the timeline 2) No signs of the RM600 million short term loan to be repaid in this quarter. In this regard, I believe banks will allow Armada to stretch its repayment schedule as Armada is generating healthy cash flow and Armada has to pare down its project financing before channeling the funds to paying its unsecured lenders.
Having said that, I believe Q42020 would be a strong quarter premised upon 1) Kraken returning to 99.9% uptime after the planned maintenace 2) JV and associate returning to the black of roughly RM100 million per annum 3) Sale of the OSV asset under point 4) above; and
In my opinion, Armada will report a very strong Q4, most definitely above Q3 and very likely above Q2 results.
Thank you Jojobaa for your very detailed analysis of Armada. I learnt much from your assuring view points of the chance of ipairment of OMV assets as its asset values is something I am tring to determine. I largely concur with you the positive cashflow and paring down of the outstanding loansAS real keys to Armada's improving fianacial tURN around. Its long term FPSO contractual orders also provide future earning visibility. Good to share , Jojobaa
@i3lurker ,The total outstanding Armada shares is 5.89 billions , how much can 11,000 shares panic selling can cause long term demage to its price ? 07/12/2020 10:09 AM
I TP out oredy as I see another fortune tis week. the good news is few middle east countries complied OPEC decision however recent resurgence of covid cases in US halted the rally, need to wait till FDA authorized moderna/pfizer use in US and US stimulus package then I will rejoin again. In conclusion, safe to hold but if u can see other opportunity then go for it, im expecting logistic goin up soon due to massive ecommerce sales this week, thougts?? . *not stock market advisory, trade at your own risk*
#pang72 Armada Ship should be very exciting next week.... 06/12/2020 12:13 PM
#pang72 Serbak elephant also can up.. Armada will fly liao 06/12/2020 12:13 PM
#pang72 I am closely monitor HLG target price of 65c.. This make me wet wet.. 06/12/2020 12:14 PM
Mabel is already wet...
Today Mabel Serba Missiles IR 4.0 were automatic launched from the battleship when she beached RM 2.01, RM 2.02 and RM 2.03..before Serba continue to climb toward RM 2.09 with fantastic volume. As per writing more than 45 million shares has already been traded.
More Missile will be launched..
Mabel Next Mid Target Price for Serba is RM 2.275. Mabel Next Mid Target Price for Armada is 40
Mabel is convinced it will go once these resistance is broken
Brent will break above $50 this week and break above $60 by end of December 2020 !
Jojobee, was Kraken downtime just a week? I estimate it may have been a bit longer, like 10 days. So the loss from the Kraken shutdown would’ve been around RM20mil. Small diff, but an upside nonetheless. If the shutdown was for 2 whole weeks, then loss was RM30mkl
It could have been a week, could have been ten days. In any case, the most important thing is that there is no planned maintenance for Kraken in the 4Q and therefore, I am optimistic with the JV returning to the back and with Kraken back to normal . In my opinion, if we assume 99.9% uptime on Kraken, and JV returning to the black with a RM25 million quarter profit, I predict that Armada will report a core net profit of RM120-RM125 million after accounting for seasonally weaker OSV utilization during the monsoon season. If Armada is trading at 37.5 cents at 85 mil net profit, I wonder what will Armada trade at when my prediction of RM120-125 million is nearly correct.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Mabel
24,082 posts
Posted by Mabel > 2020-12-06 11:52 | Report Abuse
The FTSE Bursa Malaysia KLCI (FBM KLCI) is set to trade between 1,640 and 1,650 next week, bolstered by window-dressing activities which are expected to kick off then.
It's time for our Armada to breach 40 next week!
On Friday, Mabel P1 Serba Dinamik Battleship climbs +0.23 (13.86%) to close RM 1.89
Let see which one will cross RM 2.00 first, Fossil Fuel Serba or Dayang vs BioFuel FGV Plantation
Meow Meow Meow