Maybank maintains hold on Bumi Armada pending de-gearing exercise

KUALA LUMPUR: Bumi Armada Bhd has to work on its balance sheet, de-gear and do a cash call for new job wins in the follow-up to the resolution of the Kraken issue, said Maybank Investment Bank Research.

The research house maintained its hold call on the counter with a target price of 55 sen.

To recap, Bumi Armada received the final acceptance certificate by Enquest for FPSO Armada Kraken. The company paid US$20mil in liquidated damanges and US$65mil due to amendments to the original contract, and will pay U$25mil for the revision on certain charter terms in FY18.

Maybank Investment said the final acceptance is positive for Bumi Armada as it removes termination risk and de-risks earnings. 

"This enables BArmada to recognise an additional 10-20% of its bare-boat charter. In addition, that would also enable BArmada to access the USD1.5b MTN, which is associated with the final acceptance."

The research house said the company's next move would be to work on its balance sheet and refinance RM6.2bil of short-term debt, of which 31% is Kraken-related. 

"We do not rule out prospective corporate exercises (e.g. placement, rights issue, selling of strategic asset(s), private trusts) to de-gear. Its net gearing level stood at 1.8x as at Jun 2018," it said.