Bumi Armada upgrades on improving fundamentals

by AUFA MARDHIAH / pic source: bumiarmada.com

BUMI Armada Bhd recorded a growth of 17% year-on-year (YoY) in earnings to RM185.8 million on lower depreciation charges (from the inactive Claire Armada floating production storage and offloading [FPSO] that was fully depreciated in December 2021), lower finance costs (16% reduction YoY to RM85 million from debt repayment) and higher contribution from joint ventures.

Revenue for the first quarter 2022 (1Q22) eased by 2% YoY to RM529 million due to lower revenue from its offshore marine services after the disposal of four offshore support vessels (OSV) including three ice vessels which is in line with the management’s direction to exit the OSV segment — Bumi Armada still has three OSV vessels under its fleet.

The company recorded a higher margin of 48% (due to lower operating cost and depreciation as compared to 39% in 4Q21) with a steady orderbook (remains at RM13.2 billion with a potential extension worth RM9 billon).

The FPSO orderbook can maintain group earnings for the long term with three contracts expiring in 2024-2025 and four more contracts in the longer term.

Bumi Armada continues to bid for new FPSO jobs while the inactive Claire Fleet FPSO will be sold or cancelled this year.

Lee Cherng Wee from JF Apex Securities Sdn Bhd stated Bumi Armada’s earning for 1Q22 is within expectation, with lowest gearing since 2015.

“With a net profit of RM186 million, Bumi Armada achieved 27% of our full year forecast while quarterly revenue of RM529 million makes up 19% of our financial year 2022 forecast (FY22F).

“Bumi Armada also managed to effectively reduce its net debt to equities from 1.76 times in the 4Q21 to 1.52 times, the lowest since 2015. Its net debt was reduced to RM5.7 billion from RM6.1 billion in the 4Q21 due to loan repayment of RM447 million in the 1Q22,” he wrote in a report on the oil support services provider recently.

Lee upgraded Bumi Armada to ‘Buy’ with a target price of 53 sen. Bumi Armada shares were last traded at 43.5 sen today. 

“Our target price is basically based on +1.5 standard deviation at an average of three years price to book and FY22F book value per share. We expect the outlook to improve given the high oil prices and Bumi Armada’s continued efforts to lower gearing,” he stated.