We maintain our BUY
call on Bumi Armada, with an unchanged sum-of-parts-based fair value of RM5.05/share, which implies an FY12F PE of 26x.
We maintain FY12F-FY13F earnings as FY11 net profit of RM360mil
was in line with our expectation – 5% below our forecast and 3% below street
estimate’s RM369mil. We introduce FY14F net profit with a 14% growth, assuming
that the group’s floating production storage offloading (FPSO) fleet increases
by one to 10.
Our forecasts had earlier already incorporated two new FPSO
contracts awarded last year:- (1) the Armada Clair floating, production,
storage and offloading (FPSO) charter from Apache Energy Ltd at WA-49-L of the
Balnaves Field, Northern Carnarvon Basin, offshore north-west Australia; and
(2) the 50:50 JV with Forbes for ONGC’s D1 Mumbai field in India. We have
introduced FY12F-FY14F DPS based on a payout ratio of 15% given the group’s
surprise FY11 tax-exempt dividend of 2.5 sen.
QoQ, the group’s 4QFY11 net profit rose 35% to RM125mil due
to:- (1) higher FPSO revenues from the Australian Apache and India’s D1
contracts, and (2) higher transport and installation (T&I) from the Armada
Installer’s 70% capacity take-up guarantee by Petronas and completion of the
Sepat Floating Storage Offloading unit installation, 3) rise in vessel utilisation
from 96% from 93% in 3QFY11, and 4) absence of the RM27mil listing and call
option expenses incurred in 3QFY11.
Including renewable options of RM3.1bil to the group’s firm orders
of RM6.9bil, the group’s order book of RM9.9bil represents 4.3x FY12F revenue.
This is likely to increase as the group is currently bidding for six FPSO
contracts in Malaysia, Indonesia, India and West Africa. Bumi Armada, together with Delcom-Emas
Offshore being the only two bidders for the St Joseph chemical enhance oil recovery
(CEOR) vessel, expects the award within the next 2-3 weeks. There could also be
another chemical CEOR prospect in the Angsi field, Sabah. Additionally, the
group, together with MISC-Ramunia, is bidding for Hess’ FPSO charter in the
North Malay basin.
Besides FPSOs, the group is also tendering for T&I jobs worth
US$250mil in the Caspian, Nigeria, Angola and Australia. Amid tightening vessel
utilisation, the group plans to acquire or build up to 10 offshore support
vessels, mainly in platform support or accommodation work vessels.
We continue to like the stock, given that re-rating
catalysts stem from :- (1) Rising likelihood of new FPSO contracts as oil &
gas developments reignite globally; (2) tighter vessel utilisation rates; (3)
potential marginal field excitement; and (4) premium scarcity for oil & gas
stocks with large market capitalisation.
The stock currently trades at an attractive FY12F PE of 20x compared
with Dialog Group’s peak of 40x in 2007.
Source: AmeSecurities
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