Bumi Armada’s FY17 core earnings slightly above forecast

KUALA LUMPUR: Bumi Armada ’s FY17 core net profit of RM322mil was 5.5% higher than CIMB Equities Research’s expectation and 2.5% above consensus due to lower-than-expected 4Q depreciation charge.   

The research house had on Tuesday downgraded the international offshore oilfield services provider from Add to Hold as its previous target was largely met.

“We cut our discounted cashflow based target price (from 88 sen to 85 sen) to factor in a stronger ringgit assumption of RM4.10:US$1, from RM4.30 previously.  

“Upside risks include potential new contract wins and the value of the claim against Woodside; downside risks include delays to final acceptance for two FPSOs (floating production storage and offloading units).   

CIMB Research said Bumi Armada delivered substantially better results, with 4Q17 turning in a core net profit of RM63m, from a loss of RM149m in 4Q16, and FY17 core net profit of RM322m, from FY16’s loss of RM93m. 

The improvements were supported by contributions from LNG Mediterrana since early-2017, from FPSO Olombendo since Feb 2017, and from FPSO Kraken since mid-2017. 

The 49%-owned Sterling 3 began contributing from Jul 2017. Also, Bumi Armada had booked compensation payable to EnQuest against its 4Q16 P&L. 

Bumi Armada had made RM1.7bil in impairment provisions in FY16 against its FPSO assets (FPSO Claire, FPSO Perdana, and two idled FPSOs), and against its offshore marine services (OMS) assets (Armada Condor, Armada KP1, etc.), but no impairments were made on its vessels in FY17. 

“This was a major reason why reported net profit turned around so materially between FY16 and FY17. 

“Bumi Armada noted that it expected to achieve final acceptance for the FPSO Kraken latest by 30 June 2018F, in line with our expectations,” said CIMB Research. 

Analyst Reports , Oil & Gas