Bumi Armada - Charters for five offshore support vessels

-  We maintain our BUY call on Bumi Armada, with an unchanged sum-of-parts-based fair value of RM4.65/share, which implies an FY13F PE of 23x. 

-  Fast on the heels of Bumi Armada’s recent announcement of a 1-year charter extension worth RM100mil for the Armada Perkasa FPSO, the group has announced five marine charter contracts worth RM147mil, which will have an additional option to extend the contracts by another RM102mil. 

-  The five offshore support vessel (OSV) charters, comprising 2 accommodation workboats/barge and 3 anchor-handling towing supply vessels, are as follows: (1) Accommodation workboat Armada Firman 2 for Total SA in Gabon for an initial 3-month contract value of RM12mil, plus three-monthly extension option worth RM11mil, (2) Anchor- handling towing support vessel Armada Tuah 82 for  ENI in Congo, starting in early December this year with a contract value of RM36mil for 2 years plus two annual extension option worth RM35mil, (3) An accommodation work barge Armada Hibiscus for ENI in Congo, starting in mid-December this year, for an initial 2-year contract value of RM56mil, plus 2-annual extension option worth RM56mil, (4) 2 contracts for anchor-handling towing support vessels Armada Tuah 84 and Armada Tuah 85 for Rawabi Siber Offshore Marine Pte Ltd within Saudi Arabian waters in the Arabian Gulf or Red Sea, with an aggregate 1-year contract value of RM43mil.

-  The group continues to secure steady marine charter rates, as the Saudi Arabian contracts for Armada Tuah 84 and Armada Tuah 85 work out to a strong US$2.41/bhp, while the Congo contract for Armada Tuah 82 is still decent at US$2.01/bhp.

-  The short-term contract for DP2-capable Armada Firman 2 workboat, which has a capacity of 200 beds, translates to US$215/bed while the longer-term charter for the 300-personnel Armada Hibiscus workbarge, which does not have its own propulsion system, translates to US$84/bed. While these rates have a wide range due to different capabilities of the vessels and geographical location, we understand that demand in this segment remains firm. 

-  These contracts will slightly add to the group’s firm order book of RM7.6bil and options worth RM3.2bil. As these contracts are continuation of charters for existing vessels, we maintain FY12F-FY14F earnings, which assume OSV utilisation rates of 90%. The concerns for now are the delays in securing new FPSO jobs and potential share disposals, with major shareholder Tan Sri Ananda Krishnan still owning an effective 42% of the stock and bumiputera shareholders an estimated 17%. The stock currently trades at an attractive FY13F PE of 19x compared with SapuraCrest Petroleum’s peak of 29x in 2007.  

Source: AmeSecurities