PETALING JAYA: Bumi Armada Bhd
’s outlook for the fourth quarter of 2023 (4Q23) appears brighter, as its floating production, storage and offloading (FPSO) Kraken will be running and most likely achieve 100% utilisation, say analysts.
Hong Leong Investment Bank (HLIB) Research said it expects the company to register sequential earnings growth in the coming quarter premised on better quarterly earnings from FPSO Kraken, as well as first oil being achieved in Oil and Natural Gas Corp’s (ONGC) KG-DWN98/2 in the coming weeks.
Based on HLIB Research’s estimates, the first oil achieved will lead to material contribution from Armada Sterling 5 upon final acceptance in 1Q24.
It was noted by HLIB Research that Bumi Armada will not be participating in any mega-FPSO projects with a capital expenditure (capex) of US$2bil to US$3bil in the near term.
“Any new mega-FPSO jobs will likely rope in equity partners to share capex risks.
“We note that Bumi Armada’s capital discipline over the past few years has resulted in a consistent decline of net gearing to 0.66 times as at 3Q23 from 2.95 times in 1Q20, allowing it to gear up for new job opportunities,” it stated.
Meanwhile, CGS-CIMB Research said it has pencilled-in a core net profit forecast of RM177mil in 4Q23 for Bumi Armada.
Despite still being lower than 1Q23’s forecast of RM198mil, the research house said it was up from 3Q23’s forecast of RM159mil due to the FPSO Kraken achieving 100% utilisation in the coming quarter.
Bumi Armada has recorded a 19.64% drop in its revenue to RM524.8mil and a net profit of RM177.77mil, or an earnings per share (EPS) of three sen per share, for 3Q23 ended Sept 30.
HLIB Research said it noted that the capacity of the FPSO Kraken has been fully restored since early August, which then contributed positively to the quarter.
This was added with contributions from associates that also rose sharply due to some lumpy maintenance expenses being incurred by the joint ventures in 2Q23.
CGS-CIMB Research said despite the strong rebound in FPSO earnings, Bumi Armada’s 3Q23 core net profit was still 20% lower than 1Q23 due to wider foreign-exchange losses, the absence of technical management fees as well as losses during the quarter from the technology, engineering and projects division.
Meanwhile, its net profit year-to-date was RM497.55mil as compared to RM521.73mil in the same period in 2022, while revenue fell to RM1.51bil from RM1.8bil.
HLIB Research said it is mainly due to the failure of HSP transformers on FPSO Kraken and lower revenue from the subsea construction contract work in the Caspian Sea as the project was near completion in 2023.
It has maintained a “buy” call on the group with a target price of 71 sen per share. As for CGS-CIMB Research, it reiterated an “add” call on Bumi Armada with a slightly lower target price of 73 sen per share, on the back of a 2% to 4% core EPS forecast reduction for the financial year 23 (FY23) until FY25.
