PETALING JAYA: Analysts remain bullish on Bumi Armada Bhd
following the announcement of the group winning a contract with EnQuest Heather Ltd on Nov 1.
The four-year agreement was inked via its wholly owned subsidiary, Bumi Armada UK Ltd, to provide a flare gas recovery system on the Magnus Platform located in blocks 211/12a and 211/7a off Britain in the North Sea.
According to Phillip Capital Research, the estimated contract value of about RM282mil suggests that oilfield services company Bumi Armada will be receiving annual revenue of RM70mil over the four-year period of the contract.
“Based on typical profit after tax (PAT) margins of 7% to 8% for engineering, procurement and construction projects of this nature, we expect Bumi Armada to recognise annual PAT of RM5mil to RM6mil from the contract, representing 1% of earnings forecasts,” the research house said in a report.
The research house maintained its earnings forecast on the group and reiterated a “buy” call with an unchanged target price of 83 sen per share.
Also sharing a positive view on the project win, CIMB Research said the contract enhances Bumi Armada’s strategic position in the North Sea while creating opportunities for expansion into other markets.
The research house said that the group winning the contract was in fact not a surprise due to the long-standing relationship between Bumi Armada and EnQuest, which dates back to 2013.
CIMB Research projected a much high value of the project’s contribution to Bumi Armada’s revenue.
“Based on the contract value, the contract is projected to contribute RM11.8mil to RM70.6mil to Bumi Armada’s revenue over the financial years 2024 (FY24) until FY28.
“Assuming a profit margin of 10%, consistent with typical margins for floating production storage and offloading, engineering, procurement, construction and commissioning and other similar projects, the contract is expected to add RM1.2mil to RM7.1mil to operating profit over the period.
“The impact of the contract on our earnings projections for FY24 to FY26 is minimal, contributing only 0.1% to 1.1%,” CIMB Research added.
CIMB Research also maintained its FY24 to FY26 earnings forecast as well as a “buy” call, with a target price of 78 sen on Bumi Armada.
