KUALA LUMPUR: Affin Hwang Research has maintained its Buy call on Bumi Armada
with a target price of RM1.70 and continued to like the group as it is an attractive proxy for the global FPSO and Caspian Sea T&I markets.
In a note on Friday, the research house said these market segments are relatively insulated from the current oil-price weakness, and that good execution of its existing FPSO contracts would provide the group with stable, long-term earnings growth.
"The risks to our positive view on Bumi Armada are lower-than-expected earnings, operational risks, and a longer-than-expected share-price overhang arising from the rights issue," it noted.
Bumi Armada' 9M14 net profit fell by 21% on-year to RM271mil on weaker earnings from transportation & installation (T&I) and offshore support vessels (OSV) divisions.
Sequentially, 3Q14 net profit increased by 10% to RM108mil on higher earnings across all business segment.
"Overall, the results are within our expectations but below market forecast. Bumi Armada’s 9M14 net profit accounts for 67% of Affin Hwang and 59% of consensus full year earnings estimates," it said.
However, Bumi Armada said that the current harsh weather condition in Caspian Sea will likely affect its T&I operation in 4Q14 / 1Q15.
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