- We
maintain our BUY call on Bumi Armada, but with a lower sum-of-parts-based fair
value of RM4.65/share (vs. RM5.05/share earlier), which implies an FY13F PE of
23x vs. the oil & gas sector’s 17x.
- We have
lowered FY12F-FY14F earnings by 11%-17% largely due to a 2ppt-reduction in the
margins for the floating production storage and offloading (FPSO) division and
a 3ppt-cut in the offshore support vessel (OSV) segment.
- The
group’s 1QFY12 net profit of RM90mil came in below expectations – making up 16%
of our earlier FY12F net profit and 19% of street estimate’s RM485mil. QoQ, the
group’s 1QFY12 net profit declined 28% due to:- (1) weakening of US$ vs. the
ringgit by 4% on the group’s mostly US$-derived revenue, and (2) absence of
annual performance bonus enjoyed in 4QFY11 by the Afren FPSO contract for
Armada Perkasa in Nigeria, 3) Unplanned maintenance for two OSVsArmada Firman 2
& 3 in Nigeria, and 4) absence of the contributions from the completed
Sepat floating storage offloading installation contract.
- The order
book has risen slightly to RM10.1bil (including optional extensions worth
RM3.1bil) from RM9.9bil in the previous quarter largely due to fresh charters
secured for the OSV division. Including the US$200mil (RM629mil) for the LukOil
installation contract awarded in April this year, the order book would be even
larger at RM10.7bil, representing 5.1x FY12F revenue.
- This is
likely to further increase as the group is currently bidding for five FPSO
contracts in Malaysia, Indonesia, India, Vietnam and Africa. We understand that
while only one FPSO contract was awarded globally year-to-date, the pace of
awards is expected to gain momentum in 2H2012, similar to the rollout trend
last year.
- We
understand that the Belud FPSO contract could be retendered. Likewise, the
contract for the St Joseph chemical enhanced oil recovery (CEOR) could be
re-tendered, but Bumi Armada and
Delcom-Emas Offshore are currently still the only two bidders. Besides FPSOs,
the group is also tendering for T&I jobs in the Caspian, Nigeria, Angola
and Australia. Amid tightening vessel utilisation, the group has embarked on
its ‘Steel on Water 2’ vessel expansion programme via purchase and construction
activities, but on a more gradual process compared to the earlier phase 1. The
two anchor handling tug supply vessels, Armada Tuah 107 & 108, recently
acquired from financially troubled Sanko Steamship, have been chartered out to
Nigeria.
- We
continue to like the stock due to:- (1) Likelihood of new floating production
storage and offloading (FPSO) 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 FY13F PE of 20x compared with SapuraCrest
Petroleum’s peak of 29x in 2007.
Source: AmeSecurities
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