Bumi Armada - First platform supply vessel contract from Petrobras BUY

- 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.

- Bumi Armada has secured its first platform supply vessel (PSV) charter contract from Petróleo Brasileiro S.A. (Petrobras) valued at RM115mil for its Armada Tuah 301. The charter, over four years with an option to extend for another four years, will commence in 2QFY12.This 75 metre-long vessel, which weighs 3,000 dead weight tonnes, offers multifunctional roles in transport of cargo, personnel transfer and rescue operations between platforms. It will accompany the group’s two anchor handling tug supply vessels Armada Tuah 102 and 104, which are currently operating offshore Brazil.

- The Armada Tuah 301 charter value is 26% lower than the charter for the group’s 12,000bhp anchor handling tug supply vessel (AHTS) Armada Tuah 102 which was also secured from Petrobras in January this year. This is largely because Armada Tuah 301 does not offer anchor handling services with require more expensive towing equipment. 

- We are positive that the group continues to secure fresh marine charters with its vessel utilisation rate currently at near 100%. This is in line with our FY12F-FY14F vessel utilisation assumptions of 95%-100%. Hence, we maintain our FY12F-FY14F earnings for now.

- The group is on the prowl to acquire additional platform supply vessels and accommodation work boats given its tightening asset utilisation rates. This also supports our view that marine charter operations for the industry is reaching an inflection point which will lead to a significant increase in charter rates in 2H2012 (See our sector report on 16 February 2012).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. 

- We continue to like the stock due to the following re-rating catalysts:- (1)Rising likelihood of new floating production storage and offloading vessel contracts as oil & gas developments reignite globally, (2) tightening vessel utilisation rates, and (3) premium scarcity for oil & gas stocks with large market capitalisation.

- The stock currently trades at an attractive FY12F PE of 23x compared with SapuraCrest Petroleum’s peak of 29x in 2007.

Source: AmeSecurities