Bumi Armada gets ‘Hold’ recommendation

Aminvestment Bank Bhd maintained a ‘Hold’ recommendation on Bumi Armada Bhd with unchanged forecast and fair value of 79 sen per share, but remained cautious on the company’s earnings prospects.

The research firm said the fair value price is derived from a 20% discount to its sum-of-parts valuation of 99 sen a share.

Bumi Armada has suspended the operations of its wholly owned floating, production, storage and off-loading vessel (FPSO) Armada Perdana, following irregular payments for the operation

and maintenance (O&M) services together with long-delayed charter payments involving the OML 120 block, Oyo field off Nigeria, by independent oil and gas operator Erin Energy Corp.

AmInvestment said two of Bumi Armada’s FPSOs — including Armada Perkasa — were operating in Nigeria, yet were only being remunerated for their O&M services since the second-quarter of 2016.

“But without being compensated for the bare boat charter, which makes up the main bulk of their revenues. With the suspension of Armada Perdana’s operation, Bumi Armada’s activities in Nigeria have reached an end, with the only remaining FPSO operation in Africa by Armada Olombendo having achieved first oil in Angola on Feb 8 this year,” said the research firm.

AmInvestment said even with the full recognition of the massive US$1.5 billion (RM6.43 billion) Armada Olombendo, the firm remains cautious on the company’s near-term earnings trajectory — given the uncertain penalties which could arise from the delays in the commencement of the US$1 billion FPSO Kraken’s contract in the North Sea. — TMR