ARMADA (5210) : Bumi Armada - Looking for a new captain
Target RM2.56 (Stock Rating: ADD)
Hassan Basma is stepping down as CEO due to “family reasons’, but will stay on as a consultant until mid-2016, he told us yesterday. Under his leadership, Bumi Armada has climbed a notch to No. 5 in the world’s FPSO league table over the past three years. While his resignation as CEO is a negative development, we take comfort in the company’s long-term fundamentals, supported by a firm order backlog of RM21.8bn. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x pending a review of our premium valuations. Maintain Add with a strong FPSO contract pipeline as potential re-rating catalyst.
What Happened
Bumi Armada announced that Hassan had requested for an early release from his employment contract. He will relinquish his positions as CEO and executive director with effect from 1 Jan 2015. However, he will continue to be engaged as a consultant to the company on specific projects. Pending the appointment of a new CEO, Chan Chee Beng, a member of the board since 2003, has been re-designated as executive director and acting CEO. He has also been a member of the executive committee since 2008, acting as its chairman since last year.
What We Think
While Hassan’s resignation as CEO was a negative surprise, he assured us during our telephone conversation yesterday that it is business as usual at Bumi Armada. He also confirmed that he is stepping down due to family reasons, and that he will take on the consultancy role until mid-2016. Hassan was instrumental in securing large contracts, such as Kraken and 1506, both are worth at least US$1bn each, for Bumi Armada, and in moving the company to the fifth spot in the world’s FPSO league table by fleet size from the sixth spot during the company’s IPO in Jul 2011. Secured in Mar 2014, the US$2.9bn 1506 contract is Bumi Armada’s biggest ever. Separately, management targets to finalise the Madura contract by year-end after three delays.
What You Should Do
Take advantage of the share price correction and accumulate the shares. Despite the leadership change and current oil price weakness, we continue to like Bumi Armada’s long-term fundamentals, anchored by its firm order book of RM21.8bn, excluding the 10-year US$1.18bn Madura contract and extension options worth RM11.8bn. The company is currently bidding for four FPSO projects - one each in Ghana, Nigeria, Namibia and Angola.
Source: CIMB Daybreak - 08 December 2014
Target RM2.56 (Stock Rating: ADD)
Hassan Basma is stepping down as CEO due to “family reasons’, but will stay on as a consultant until mid-2016, he told us yesterday. Under his leadership, Bumi Armada has climbed a notch to No. 5 in the world’s FPSO league table over the past three years. While his resignation as CEO is a negative development, we take comfort in the company’s long-term fundamentals, supported by a firm order backlog of RM21.8bn. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x pending a review of our premium valuations. Maintain Add with a strong FPSO contract pipeline as potential re-rating catalyst.
What Happened
Bumi Armada announced that Hassan had requested for an early release from his employment contract. He will relinquish his positions as CEO and executive director with effect from 1 Jan 2015. However, he will continue to be engaged as a consultant to the company on specific projects. Pending the appointment of a new CEO, Chan Chee Beng, a member of the board since 2003, has been re-designated as executive director and acting CEO. He has also been a member of the executive committee since 2008, acting as its chairman since last year.
What We Think
While Hassan’s resignation as CEO was a negative surprise, he assured us during our telephone conversation yesterday that it is business as usual at Bumi Armada. He also confirmed that he is stepping down due to family reasons, and that he will take on the consultancy role until mid-2016. Hassan was instrumental in securing large contracts, such as Kraken and 1506, both are worth at least US$1bn each, for Bumi Armada, and in moving the company to the fifth spot in the world’s FPSO league table by fleet size from the sixth spot during the company’s IPO in Jul 2011. Secured in Mar 2014, the US$2.9bn 1506 contract is Bumi Armada’s biggest ever. Separately, management targets to finalise the Madura contract by year-end after three delays.
What You Should Do
Take advantage of the share price correction and accumulate the shares. Despite the leadership change and current oil price weakness, we continue to like Bumi Armada’s long-term fundamentals, anchored by its firm order book of RM21.8bn, excluding the 10-year US$1.18bn Madura contract and extension options worth RM11.8bn. The company is currently bidding for four FPSO projects - one each in Ghana, Nigeria, Namibia and Angola.
Source: CIMB Daybreak - 08 December 2014
