ARMADA (5210) : Bumi Armada - Madura still floats our boat
Target RM2.56 (Stock Rating: ADD)
Lower FPSO profit recognition led to a disappointing 9M net profit that missed expectations, forming 50% of our FY14 net profit and 67% of consensus. We expect newer FPSO jobs to start contributing next year. Separately, the Madura floater will likely be put into action by year-end. A larger share base post-rights issue leads to FY14-16 EPS reduction and a lower adjusted target price. Operationally, we cut our FY14 EPS as C7 profit will only come through next year. We now value the stock at 21.2x CY16 P/E (formerly 22.5x CY15 P/E) as we roll over our valuations and scale back the target premium over our 16.3x target market P/E from 40% to 30% to reflect the current weak oil price. Maintain Add with a strong FPSO contract pipeline as a potential catalyst.
11% drop in 3Q net profit yoy
Bumi Armada's 3Q14 net profit dropped 11% yoy due to two factors: 1) Lower profit recognition from newer floating, production, storage and offloading (FPSO) projects, notably the C7, Kraken and 1506. The company’s new accounting system recognises minimum profits during the conversion period of 2-3 years. The profit contributions increase substantially once the conversion works are completed and the firm charters start. 2) Lower utilisation of its offshore support vessels, falling from an estimated 85% in 3Q13 to 74% in 3Q14. The absence of an interim dividend was expected.
RM21.8bn order book
Contributions from the C7 contract are likely to come through next year, instead of this year. This is a timing issue as Bumi Armada’s order book remains solid at RM21.8bn, excluding extension options worth RM11.8bn. The RM21.8bn order book does not include the 10-year US$1.18bn Madura contract, which we understand will be finalised by year-end after two delays. The contract, which comes with options for five annual extensions worth US$147m, was secured by 50%-owned unit, PT Armada Gema Nusantara, on 19 Aug 2014.
Eyeing four FPSO contracts
Madura is Bumi Armada’s ninth FPSO contract and the second secured this year after the US$2.9bn 1506 contract awarded in Mar. The 1506 contract is Bumi Armada’s biggest ever. The company is currently bidding for four FPSO projects - one each in Ghana, Nigeria, Namibia and Angola.
Source: CIMB Daybreak - 21 November 2014
Target RM2.56 (Stock Rating: ADD)
Lower FPSO profit recognition led to a disappointing 9M net profit that missed expectations, forming 50% of our FY14 net profit and 67% of consensus. We expect newer FPSO jobs to start contributing next year. Separately, the Madura floater will likely be put into action by year-end. A larger share base post-rights issue leads to FY14-16 EPS reduction and a lower adjusted target price. Operationally, we cut our FY14 EPS as C7 profit will only come through next year. We now value the stock at 21.2x CY16 P/E (formerly 22.5x CY15 P/E) as we roll over our valuations and scale back the target premium over our 16.3x target market P/E from 40% to 30% to reflect the current weak oil price. Maintain Add with a strong FPSO contract pipeline as a potential catalyst.
11% drop in 3Q net profit yoy
Bumi Armada's 3Q14 net profit dropped 11% yoy due to two factors: 1) Lower profit recognition from newer floating, production, storage and offloading (FPSO) projects, notably the C7, Kraken and 1506. The company’s new accounting system recognises minimum profits during the conversion period of 2-3 years. The profit contributions increase substantially once the conversion works are completed and the firm charters start. 2) Lower utilisation of its offshore support vessels, falling from an estimated 85% in 3Q13 to 74% in 3Q14. The absence of an interim dividend was expected.
RM21.8bn order book
Contributions from the C7 contract are likely to come through next year, instead of this year. This is a timing issue as Bumi Armada’s order book remains solid at RM21.8bn, excluding extension options worth RM11.8bn. The RM21.8bn order book does not include the 10-year US$1.18bn Madura contract, which we understand will be finalised by year-end after two delays. The contract, which comes with options for five annual extensions worth US$147m, was secured by 50%-owned unit, PT Armada Gema Nusantara, on 19 Aug 2014.
Eyeing four FPSO contracts
Madura is Bumi Armada’s ninth FPSO contract and the second secured this year after the US$2.9bn 1506 contract awarded in Mar. The 1506 contract is Bumi Armada’s biggest ever. The company is currently bidding for four FPSO projects - one each in Ghana, Nigeria, Namibia and Angola.
Source: CIMB Daybreak - 21 November 2014
