Bumi Armada is set to win big contracts from Petronas, especially floating production, storage, off-loading jobs (FPSO) and marginal field projects, which could re-rate the stock, HwangDBS Vickers Research said today.
The research house maintained a "Buy" for Bumi Armada at RM5 target price as it expected the company to secure the lucrative risk service contracts (RSCs) for Petronas’ marginal fields this year.
"It is also premised on long-term earnings visibility of RM7.2 billion firm order book (excluding a joint-venture FPSO project in India worth RM1.9 billion) and strong three-year earnings compounded annual growth rate of 26 per cent.
"Its excellent track record and synergistic oil and gas services, especially FPSO solutions, may appeal to foreign oil companies seeking to rope in a local partner for RSCs.
"We understand Bumi Armada is keen to bid for marginal fields and its new oil field services division sends a strong signal that it is leveraging on its expertise to aggressively bid for RSCs, which are believed to command 11-20 per cent Internal Rate of Return." it said in a statement.
The research firm said FPSO tenders were picking up and Bumi Armada would bid for more FPSO contracts in Malaysia as more jobs take off.
It said the FPSO tender process for Petronas’ RM15 billion North Malay Basin development had started, with the contract slated to be awarded by year-end to meet production by 2013.
Petronas is also likely to apply FPSO solutions to its "Bunga Dahlia" and "Teratai" fields, it said.
Meanwhile, the FPSO tender for the "ONGC Cluster 7" marginal fields in India has started and Bumi Armada is likely to bid for it, it added.
As at midday, Bumi Armada shares gained two sen to RM4.09. -- Bernama
The research house maintained a "Buy" for Bumi Armada at RM5 target price as it expected the company to secure the lucrative risk service contracts (RSCs) for Petronas’ marginal fields this year.
"It is also premised on long-term earnings visibility of RM7.2 billion firm order book (excluding a joint-venture FPSO project in India worth RM1.9 billion) and strong three-year earnings compounded annual growth rate of 26 per cent.
"Its excellent track record and synergistic oil and gas services, especially FPSO solutions, may appeal to foreign oil companies seeking to rope in a local partner for RSCs.
"We understand Bumi Armada is keen to bid for marginal fields and its new oil field services division sends a strong signal that it is leveraging on its expertise to aggressively bid for RSCs, which are believed to command 11-20 per cent Internal Rate of Return." it said in a statement.
The research firm said FPSO tenders were picking up and Bumi Armada would bid for more FPSO contracts in Malaysia as more jobs take off.
It said the FPSO tender process for Petronas’ RM15 billion North Malay Basin development had started, with the contract slated to be awarded by year-end to meet production by 2013.
Petronas is also likely to apply FPSO solutions to its "Bunga Dahlia" and "Teratai" fields, it said.
Meanwhile, the FPSO tender for the "ONGC Cluster 7" marginal fields in India has started and Bumi Armada is likely to bid for it, it added.
As at midday, Bumi Armada shares gained two sen to RM4.09. -- Bernama
