KUALA LUMPUR: PublicInvest Research said the negative newsflow for Bumi Armada Bhd
does not affects its earnings estimates and valuations for the counter as it had already excluded the affected contributions.
The research house maintained its neutral call on the counter with an unchanged target price of 90 sen.
On Tuesday, Bumi Armada announced that its operations on the FPSO Armada Perdana is to be shut down due to a Force Majeure Event.
Furthermore, the crude oil produced and to be produced and stored in Armada Perdana has been seized in relation to certain legal proceedings, but of which Bumi is not party to.
According to PublicInvest Research, Bumi Armada's stand is that the Force Majeure declaration is wrongful under the Operational and Maintenance Services Contract, though it can also be argued
if that is applicable considering that operations have been suspended since June last year.
"Estimated financial impact of credit risk recovery to the results of the Group for the financial year ending 31 December 2018 is approximately RM30m.
"Most provisions (RM161m of receivables in 2015) and/or write-offs (in 2016) with regard to this particular FPSO have already been made in previous financial years, hence no material impact is expected should there be residual amounts."
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