Bumi Armada shares hit all-time low on heavy selling

Shares of the oil eld services rm slump in the 2H of the market session with some 167.4m shares done

by ALIFAH ZAINUDDIN / graphic by TMR

BUMI Armada Bhd’s stock price fell 7.5 sen or 28% to a historic low of 19 sen per share yesterday, thus wiping out some RM16.3 billion from its market capitalisation since it first went public in July 2011.

Shares of the oilfield services provider opened one sen higher at 27 sen in early trade yesterday, before slumping in the second half (2H) of the market session with some 167.4 million shares done, making it the most actively traded counter for the day.

“The selling in the afternoon suggest its was done by banks due to margin calls. The stock was ripe for this as its financial performance has been poor,” a remisier with a local brokerage told The Malaysian Reserve.

Bumi Armada’s trading volume was more than double the 20-day average, according to Bloomberg.

The tough operating environment in the energy sector has hit companies like Bumi Armada hard, leading sector analysts to lower their consensus one-year target price on the stock by 44% in the past three months due to fears over its financial health.

The target price forecast for the stock ranges from 20 sen to 95 sen. On Nov 26, KAF Seagroatt & Campbell Securities Sdn Bhd analyst Joe Vuei Wong downgraded Bumi Armada to ‘Hold’ and assigned a target price of 35 sen.

Public Investment Bank Bhd analyst Nurzulaikha Azali also downgraded the stock to ‘Neutral’ and assigned a target price of 35 sen on the same day.

Last week, Bumi Armada recorded a hefty net loss of RM502.8 million for its third quarter ended Sept 30, 2018 (3Q18), against a net profit of RM123.7 million in the previous year on higher asset impairments.

Revenue for the quarter fell 8.3% to RM588 million from RM641.4 million in 3Q17.

In its filing to Bursa Malaysia, Bumi Armada noted it would have made a net profit of RM75.2 million if not for the non-cash impairments of RM41.4 million for its floating production and operation facility and RM522.1 million for the offshore marine services businesses.

Bumi Armada ED and CEO Leon Harland said the company has been in talks with its creditors to restructure US$500 million (RM2.1 billion) in loans.

“There is a continuing focus on strengthening our overall balance sheet. We are working with our lenders to put in place a refinancing of our US$500 million debt, of which one-third was due in October 2018.

“We have made a partial repayment of US$120 million in October 2018 and are looking to refinance the balance of debt into a longer-term facility,” he said.

Harland added that the group would focus on optimising cost structure, monetisation of underutilised assets, as well as collecting and generating more cashflow next year.