PETALING JAYA: Bumi Armada Bhd
is expected to register a core net profit increase in the second quarter of its financial year ended June 30, 2024 (2Q24), spurred by improving income.
AmInvestment Bank in a report said it expects Bumi Armada’s 2Q24 core net profit to multiply by more than 2.5 times year-on-year to RM210mil.
“This is mainly due to the loss of 2Q23 income from floating production, storage and offloading (FPSO) vessel Armada Kraken, which became inoperable due to failure of its hydraulic submersible pump transformers, that was partly offset by gains from the sale of FPSO Armada Claire.
“However, on a sequential basis, we see a decline of 16% for the group’s 2Q24 core net profit as earnings normalise after having recognised a one-off charter backpay amounting to RM53mil in 1Q24 from the revision of operating fees for FPSO Armada Olombendo.”
This, the research house said, brings its projected core net profit for the first half of its current financial year to RM460mil.
“This could come in at 55% of our full-year and consensus estimates. Additionally, we do not expect any dividend for the year, which is consistent with the group’s historical trend.”
Though AmInvestment Bank said it does not foresee any surprises for the group’s upcoming earnings announcement, tentatively scheduled in the third week of August, the research house however said it expects investors to focus on the group’s recent development and near-term catalysts.
This includes the extension of the charter contract for FPSO Armada TGT 1, due to expire by Nov 14, 2024.
“We understand from management that the operator, Hoang Long Joint Operating Co, is currently undergoing exploration activities at two infill wells as part of the Te Giac Trang field phase 2 development, which will potentially involve a tie-back option to the vessel.”
AmInvestment Bank said it also expects clarity on standby payments for FPSO Armada Sterling V, which recently achieved final acceptance and commenced its firm charter period.
“However, it was reported in June this year that the group is currently facing delayed standby payment issues. Recall that the vessel arrived at the KG-DWN-98/2 field offshore Kakinada, India in end-2022, but saw first oil delayed due to operational challenges from the client.”
Additionally, AmInvestment Bank said it expects progress on efforts to refinance Bumi Armada’s net current liability position of RM2.3bil, which arose from reclassification of facilities due by September this year.
“Management previously indicated that it was exploring refinancing with a US dollar-denominated bond, given its topline foreign exposure.”
Despite being bullish on the outlook for the FPSO sub-sector, AmInvestment Bank said it is turning more selective on beneficiaries for the sector, given recent developments within the market.
“Though larger global competitors are shifting their strategy towards catering to a client-owned vessel segment, we struggle to gather leads on potential new FPSO contract awards for Bumi Armada. We believe Yinson Holdings Bhd remains the preferred player within this space, given its relationships with clients and stronger track record of timely execution relative to Bumi Armada.”
