ARMADA (FV RM4.37- EUTRAL) FY11 Results Review: Making Gradual Improvement

Bumi Armada’s FY11 results were below consensus but above our estimates. Overall, there was higher contribution  from its FPSO operations in Australia and India, as well as improved vessel utilization rates. We are  tweaking upwards our FY12 earnings forecast by 3% to factor in the possibility of the company securing new FPSO contracts each for FY12 and FY13, but towards year-end. Maintain Neutral, at a higher FV of RM4.37 (previously RM3.55), based on existing sum-ofparts valuation.

Above expectation. Bumi Armada’s FY11 results were below consensus but above our expectations, making up 89% and 106% of our forecasts. Although its 4QFY11 revenue of RM370.9m was lower by 8.2% q-o-q due to the lower FPSO revenue in relation to engineering services recognized from Apache, its EBIT of RM167.3m  was 30.4% higher q-o-q in view of the lower listing expense of RM1.2m charged in 4QFY11 versus RM20.3m in 3QFY11, as well as improved fleet utilization. YTD, both Bumi Armada’s FY11 revenue and profit before tax  surged 24.4% and 13.7% respectively to  RM1,543.9m and RM435.9m, contributed by new FPSO contracts from Apache and ONGC, the higher utilization of its  OSVs and the higher utilization of its DLB, which started operation in Turkmenistan in May 2010.

Upgrading our FY12 earnings forecast by 3%. We note that the positive sentiment as well as the group’s number and value of new O&G contracts won have been increasing yo-y. Hence we are incorporating into our forecasts the potential of Bumi Armada securing a new FPSO contract each year for FY12 and FY13, but for the sake of prudence, we are only expecting the income to stream in towards year-end.

Maintain Neutral. We are raising our fair value for Bumi Armada to RM4.37 (previously RM3.55), based on  the stock’s  existing sum-of-parts valuation following our earnings upgrade. The group’s strength lies in its ability to provide one-stop solutions starting from O&G exploration to  the  decommissioning stage. Also, more than 70% of its business generates  recurring income and  a constant cash flow to the company, which is an important factor, especially since the global economy is currently facing many headwinds.

Source: OSK188