UB Kay Hian Research maintains its Market Weight with Bumi Armada as its top pick
KUALA LUMPUR: Bumi Armada Bhd
's net losses widened in the fourth quarter ended Dec 31, 2016 after a RM1.1bil non-cash impairment on several of its assets, predominantly in the offshore vessels (OSV) business segment.
The International offshore energy facilities and services provider announced on Tuesday its net losses in Q4 were RM1.29bil compared with net losses of RM85.08mil a year ago.
Its revenue fell by 65.1% to RM205.45mil from RM589.04mil a year ago mainly due to a 97.4% fall in FPSO and FGS revenue as conversion activities on all the major projects had been completed in Q4 2016, whilst in Q4 2015 these projects were at their peak construction rate.
Bumi Armada also said furthermore, compared with Q4 2015, there were reduced contributions from Armada Claire, Armada Perdana and Armada Perkasa.
Loss per share in Q4 FY16 was 22.09 sen compared with a LPS of 1.45 sen a year ago.
“EBITDA (earnings before interest, tax, depreciation and amortisation) for the fourth quarter 2016 was RM28.5mil, with an EBITDA margin of 13.9%.
Bumi Armada said after accounting for the total non-cash impairments of RM1.7bil taken during 2016, the group registered a net loss of RM1.88bil – a surge from the net losses of RM234.56mil in FY15. Its revenue fell 35% to RM1.41bil from RM2.18bil.
“The group generated net cash flows from operating activities for full year 2016 of RM1.1bil,” it said.
However, it was also not all doom and gloom as the group’s total order book as at end-December 2016 stood at RM39.5bil (RM25.6bil of firm contracts and RM13.9bil of optional extensions).
Bumi Armada executive director and CEO Leon Harland, commenting on the Q4 2016 financial results, said:
“These results reflect the dynamic situation that Bumi Armada is in today. The lower revenues stem from the fact that our four new projects, each complex and innovative in their own right, have left the conversion yard and are progressing to be put into production.
“Additionally, compared to last year we have reduced incomes from Armada Claire and our Nigerian FPSOs as well.
“The OMS business continues to struggle with low demand due to continued weak activity and seasonal slowdowns, which also added to the substantial reduction of revenues in the Q4 2016.
“Despite all this, the group has generated over RM1.0 billion in net cash flows from operating activities over the full year,” it said.
Bumi Armada said all of its four new projects left the ship yard in Q4 2016 and have now reached their respective operational locations.
“Armada LNG Mediterrana delivered its first gas to ElectroGas Malta on Jan 16, 2017 and Armada Olombendo achieved first oil on the 8 February in Angola for Eni Angola, well within budget and schedule.
“In addition, Karapan Armada Sterling III and Armada Kraken have been moored in their respective site locations in Indonesia and the UK, and are undergoing testing prior to start-up,” it said.
Harland said with the four projects due to start operations this year, Bumi Armada should see a strong increase in cashflow generation and positive core earnings for 2017.
“At the same time, we see a growing number of new project opportunities, particularly, in the large size FPSO market where we can leverage our experience gained in this market segment.
“Whilst eager to grow and motivated by our vision to become the preferred offshore production and support service provider, we are selective in the projects that we pursue such that we can deliver success to our clients and our shareholders.”
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