Tuesday 17 April 2012

Bumi Armada - Secures US$200mil LukOil T&I job 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 been awarded a US$200mil (RM614mil) contract by OAO Lukoil’s subsidiary OOO Lukoil-Nizhnevolzhskneft to engineer, procure, install and pre-commission subsea in-field and inter-field pipelines for the Filanovsky field in the Russian sector of the Caspian Sea.

- LukOil is one of Russia’s exploration and production groups. The scope of works, which involves 9 infield/inter-field lines measuring 90 kilometres, will be undertaken by Bumi Armada’s derrick pipe-lay barge, the Armada Installer. This project is expected to be completed in over 32 months with the majority of works to be carried out by end-2014.  

- Including the existing Petronas Carigali’s contract in Turkmenistan, this contract will raise Bumi Armada’s transport and installation (T&I) order book by 50% to RM1.8bil.  We have assumed fresh T&I order book assumption of RM600mil this year. Hence, we maintain our FY12F-FY14F earnings for now, pending the award of additional projects. In our view, the Armada Installer looks almost fully occupied until 2014.

- Including renewable options of RM3.1bil to the group’s firm orders, the group’s total order book has risen by 6% to an estimated RM10.5bil – which represents 4.6x FY12F revenue. This is likely to increase as the group is currently bidding for six FPSO contracts in Malaysia, Indonesia, India and West Africa. 

- Besides T&I jobs, 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. 

- 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: AmeSecurites

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