- 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.
- Bumi Armada has acquired and taken delivery of a Very Large
Crude Carrier (VLCC) known as MT Osprey for US$29mil (RM88mil) from Samoco 1233
Trust. The vessel was built in 1999 by Sumitomo Heavy Industries, Japan and has
a capacity of of 160,279 gross tonne.
- We understand that the hull of this VLCC, which can accommodate
a storage capacity of over 1 million barrels of oil, is earmarked for
conversion into a floating, production, storage and offloading (FPSO) vessel
for large projects in West Africa.
- As a comparison, the group’s second FPSO Armada Perdana,
which was converted back in 2009, has a production capacity of 40,000 barrels
per day (bpd) and storage capacity of 1.1 million barrels. This vessel is operating
for ENI’s Oyo field in Nigerias for a firm 5-year period plus 5 annual
extensions. Meanwhile, Armada Sterling, which cost US$360mil and is being
converted at Keppel Shipyard for later deployment in ONGC’s D1 marginal field,
has a storage capacity of 580,000 barrels but a higher production capacity of
50,000 bpd.
- We understand that the group undertook this pre-emptive acquisition
to secure the hull first before securing a new FPSO contract as a strategy to
take advantage of lower prices of old tankers amidst weak charter rates currently.
- This also means that the group is optimistic about securing
fresh FPSO contracts soon. The group expects four FPSO contracts to be awarded
soon, which we believe includes ONGC’s Cluster 7 marginal field in India, Indonesia’s
Madura field, Afren’s Okoro block off Nigeria and ENI’s OML field of
Nigeria.
- As such, this development reaffirms our unchanged FY13F-FY14F
net profits, which assume two fresh FPSO annually. This is further supported by
the group’s order book of RM10.5bil (including optional extensions worth RM3.2bil),
which represents a healthy 4.1x FY13F revenue.
- 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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