Thursday, 14 March 2013

Bumi Armada - Still expanding multipurpose fleet

-  We maintain our BUY call on Bumi Armada, with an unchanged sum-of-parts-based fair value of RM4.30/share, which implies an FY13F PE of 24x.

-  Bumi Armada has purchased and taken delivery of a multipurpose support vessel (MPSV) known as ‘Iremis Condor’ from Condor Shipco Ltd for US$16mil (RM49mil).

-  This diesel-electric vessel, rebuilt in 2002, has dynamic position 2 systems, a 120 tonne-main crane, moon pool, helideck, 1,100 sq metres of deck space, deck load capacity of 1,300 tonnes and can accommodate 127 people.

-  The price of this vessel is half the average US$33mil price tag for the 4 MPSVs which Bumi Armada had recently contracted Nam Cheong to build and deliver by late-2014 at a total cost of US$130mil. This is likely due to the age of the vessel and the equipment specifications on board.

-  The vessel, to be renamed Armada Condor, does not have a charter as it will be supporting Bumi Armada’s transport and installation division, likely in Africa or Latin America.

-  The group is fast expanding its multipurpose fleet as we understand charter rates are attractive for this class of vessels compared to anchor-handling tug supply vessels below 10,000 brake horse power.

-  We maintain Bumi Armada's FY13F-FY15F net profits on the unchanged assumption of 2 fresh floating, production, storage and offloading charters each year.

-  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 22x compared with SapuraCrest Petroleum’s peak of 29x in 2007.

-  But for our oil & gas picks, we prefer SapuraKencana Petroleum, which has a larger order book, more transparent earnings growth momentum from its recent tender rig acquisitions from Seadrill and larger exposure to domestic oil & gas contract awards.

Source: AmeSecurities

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