Bumi Armada’s Impairments Reversal Pushed Earnings Higher

Bumi Armada Berhad’s (BAB) 1QFY24 revenue gained +16.8% to RM635.5m, while normalised earnings gained +19.7%yoy to RM240.5m. The improved performance was due to higher contribution from Armada Olombendo FPSO and Armada Kraken FPSO, offset by lower share of results from JV and associates attributed to the share of loss from associates involved in the conversion of the Armada Sterling V FPSO.

MIDF Research maintained a BUY call with a revised TP of RM0.84 (previously RM0.62) on BAB adjusting to the impairment reversal of Kraken FPSO and Caspian Sea assets, in addition to at least three discussions to extend the charter for its FPSOs.

MIDF said today (may 31) that the associates incurred costs during the start-up phase but has not commenced full charter hire.

1QFY24 revenue increased by +19.9%yoy to RM634.2m, while earnings gained +35.2%yoy to RM429.6m. The higher performance was mainly due to higher revenue from Armada Olombendo FPSO resulting from resolution of outstanding issues with the charterer (including escalation of the operating fee pursuant to the charter agreement), and higher revenue from Armada Kraken FPSO resulting from higher vessel availability.

Others segment earnings down 8-fold. 1QFY24 revenue slipped – 91.1%yoy to RM1.3m due to lower revenue from engineering services.

Meanwhile, earnings for this segment slipped to a deficit of -RM24.8m from RM3.7m in 1QFY23. The lower earnings were mainly due to the lower revenue from engineering services and higher forex loss arising from translation of intercompany balances denominated in foreign currency. USD26m debt repaid.

The group had repaid its debt totalling to USD26m (approx. RM122.2m) in 1QFY24, with net gearing at 0.56x, the lowest since 2QFY15.

Meanwhile, Armada’s orderbook stood at RM9.7b as of 1QFY24. Certain contracts contain extension options beyond the firm contract period with a total estimated value of RM10.3b.

All in all, MIDF Research adjusted their earnings forecast for FY24 and FY25 upward by +73% and +55% respectively. This is in light that the impairments from Kraken FPSO and Caspian Sea assets had been fully reversed, in addition to the anticipation of the commencement of Final Acceptance Test in Sterling V to contribute to charter rates, and Akia PSC progressing to the seismic testing by 4QCY24, with appraisal wells expected in CY25.

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