KUALA LUMPUR: Bumi Armada Bhd
's approval from the American Bureau of Shipping (ABS) for a proposed floating LNG (FLNG) concept is expected to open doors for the company.
In an announcement yesterday, the offshore services provider said it had developed the barge-based liquefaction unit for a standardised LNG design capacity based on a modularised and repeatable compact design.
According to Kenanga Research, this means the solution, if executed without flaw, would be cheaper for the client as the floating liquefaction solution would be more flexible compared to the current onshore solution.
"The approval from ABS, a world leading classification service provider to marine and offshore assets, for an innovative FLNG infrastructure solution can bring LNG to the market in a fast-track, cost-effective, flexible, and reliable manner," said the research firm in a company update.
Meanwhile, Kenanga noted that the shutdown of the Armada Kraken FPSO is likely to impact 3QFY23 earnings.
"To recap, our forecasts assume a partial loss of bareboat charter income from Kraken in Jun-Aug 2023. This resulted in a benign 9% impact from the shutdown," it said.
However, the vessel has been fully operational since August 2023 as its transformer was successfully reconditioned and redundancy was secured in September 2023 with a fourth new transformer installed on the FPSO.
The research firm also noted the group has secured a sundicated term loan facility for about US$105.5mil with final maturity on Sept 25, 2023 to refinance its exiisting facility maturing in May 2024, reducing concerns over its current gearing level.
Kenanga maintained its sum-of-parts target price of 62 sen and "outperform" call on Bumi Armada.
"We like Armada due to sustained traction in its efforts to deleverage its balance sheet (current net gearing: 0.8x), long-term earnings visibility from substantial order book in excess of RM20bil
(including extension options), and it being the leading contender for a US$1bil EPCC contract for FPSO Cameia," it added.
