Bumi Armada Bhd (Nov 22, RM3.94)
Maintain buy at RM3.97 with target price of RM5: Earnings for 3QFY11 were strong at RM92.6 million (+54% quarter-on-quarter, -7% year-on-year), taking 9MFY11 net profit to RM234.9 million or 63% of our full-year forecast. This was despite RM20.3 million IPO-related expenses in the quarter. The expected good 3QFY11 result is attributed to additional contribution from two recently secured floating production, storage and offloading (FPSO) projects in India and Australia, and higher utilisation of its offshore support vessels (OSV) of 93% (against 83% in 2QFY11). However, the transport and installation (T&I) segment posted a small operating loss due to dry-docking expenses for its prime derrick-lay barge Armada Installer, in Baku, Turkmenistan. Nevertheless, operating margins remained superior at 31.7% (against 27.8% in 2QFY11). We also expect 4QFY11 results to be impressive, driven by contributions from Armada Installer and full earnings impact of its new FPSO projects.
This will ensure long-term earnings visibility since RM5.2 billion or 72% is anchored by FPSO contracts (excludes the joint venture’s D1 FPSO in India worth RM1.9 billion). Bumi Armada also has approximately RM3.1 billion extension options that are likely to be exercised by its FPSO clients.
We understand the results of its tender for two FPSO projects — Hess’ Belud oil and gas development in Sabah and Lam Son Joint Operating Co’s (50:50 JV between Petroliam Nasional Bhd and PetroVietnam) fields in Vietnam — will be out by next month. Bumi Armada is also bidding for more projects in the Caspian Sea, Africa and Asia. The key catalyst to watch out for in 2012 will be Petronas’ lucrative marginal oilfield development, in which the company is keen to participate. — HwangDBS Vickers Research, Nov 22
This article appeared in The Edge Financial Daily, November 23, 2011.
Maintain buy at RM3.97 with target price of RM5: Earnings for 3QFY11 were strong at RM92.6 million (+54% quarter-on-quarter, -7% year-on-year), taking 9MFY11 net profit to RM234.9 million or 63% of our full-year forecast. This was despite RM20.3 million IPO-related expenses in the quarter. The expected good 3QFY11 result is attributed to additional contribution from two recently secured floating production, storage and offloading (FPSO) projects in India and Australia, and higher utilisation of its offshore support vessels (OSV) of 93% (against 83% in 2QFY11). However, the transport and installation (T&I) segment posted a small operating loss due to dry-docking expenses for its prime derrick-lay barge Armada Installer, in Baku, Turkmenistan. Nevertheless, operating margins remained superior at 31.7% (against 27.8% in 2QFY11). We also expect 4QFY11 results to be impressive, driven by contributions from Armada Installer and full earnings impact of its new FPSO projects.
This will ensure long-term earnings visibility since RM5.2 billion or 72% is anchored by FPSO contracts (excludes the joint venture’s D1 FPSO in India worth RM1.9 billion). Bumi Armada also has approximately RM3.1 billion extension options that are likely to be exercised by its FPSO clients.
We understand the results of its tender for two FPSO projects — Hess’ Belud oil and gas development in Sabah and Lam Son Joint Operating Co’s (50:50 JV between Petroliam Nasional Bhd and PetroVietnam) fields in Vietnam — will be out by next month. Bumi Armada is also bidding for more projects in the Caspian Sea, Africa and Asia. The key catalyst to watch out for in 2012 will be Petronas’ lucrative marginal oilfield development, in which the company is keen to participate. — HwangDBS Vickers Research, Nov 22
This article appeared in The Edge Financial Daily, November 23, 2011.
