Commenting on the results, chief executive officer Leon Harland said:
KUALA LUMPUR: CIMB Equities Research expects Bumi Armada Bhd
’s debt issues to be resolved sometime in 1Q19F.
It said on Monday that three months ago, it was told that Bumi Armada had US$500mil in corporate borrowings that needed to be repaid in three equal tranches in October, December and May.
In October, Bumi Armada paid US$120mil to all syndicated lenders, leaving US$380mil for which an extension to its repayment deadline was being negotiated to match the long-term nature of Bumi Armada’s assetsand cashflow.
“We expect Bumi Armada’s debt issues to be resolved amicably, although at potentially higher interest rates, as it will not be in the lenders’ interest to push Bumi Armada to the wall.
CIMB Research also said a successful court hearing for the Armada Claire case in Western Australia’s Supreme Court could recoup US$283.5m (20 sen/share) for Bumi Armada during FY19F and help it repay its corporate borrowings faster than expected.
In 2Q18, Bumi Armada provided for US$119mil (eight sen/share) in penalties payable to EnQuest over the next 23 years in relation to Kraken’s technical issues.
“However, if Bumi Armada successfully resolves the technical issues, the penalties need not be paid and can be added back into our sum-of-parts valuation,” it said.
The research house also pointed out Bumi Armada remains profitable on core basis in Q3 2018.
Bumi Armada’s 3Q18 core net profit of RM66m was 8% higher on-year, mainly due to a tax credit in 3Q18 vs. tax expense in 3Q17.
The FPSO arm saw its 3Q18 EBIT rise 8% on-year on the back of 1) the final acceptance of the Olombendo on May 17, 2018, resulting in a higher daily charter rate (DCR), partially offset by 2) the extension of the TGT1 into its option period at a lower DCR.
Conversely, the offshore marine services (OMS) segment suffered an EBIT loss in 3Q18 vs. EBIT profit in 3Q17 due to a 10%-pt fall in offshore support vessel (OSV) utilisation to only 43% and the completion of Armada Installer’s work for Lukoil in the Caspian Sea in June 2018.
BAB’s 3Q18 reported net loss was a substantial RM503mil due to RM578mil in exceptional items on impairments to OSV fleet.
CIMB Research said there were some positive developments in its core FPSO business in 3Q18.
The TGT1’s contract was extended by six years and three months commencing August 2018, which was a substantial portion of its full eight-year option period.
The Kraken achieved final acceptance in September 2018, upon which Bumi Armada was paid its full DCR (minus the agreed penalty for non-compliance with processed crude oil specifications) and the accounting treatment transitioned from operating lease to finance lease.
It reduced its target price from 73 sen to 70 sen. The last traded price was 32 sen.
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