Affin Hwang maintains ‘buy’ on Bumi Armada, target price raised to 62 sen

  • Markets
  • Tuesday, 26 Nov 2019

KUALA LUMPUR: Underpinned by an improving outlook in the offshore marine services (OMS) segment and the resolution of operational issues with the FPSO Kraken, BUMI ARMADA BHD may be looking at brighter earnings prospects moving forward.

The group recently announced a better-than-expected third quarter core (3Q) net profit of RM87mil as the OMS segment reported a profit turnaround and JV profit increased from a tax exemption.

According to the research house, Bumi Armada currently has 32 vessels after disposing of five vessels in the third quarter.

It is also deploying another unit to Malaysia on top of the 12 units currently operating due to improving domestic activities and better rates.

Bumi Armada has also resolved the issue with the FPSO Kraken’s water filtration earlier than guided for 2020, and shared that not much rectification work will be needed moving forward.

Affin Hwang maintained its “buy” rating on Bumi Armada and raised its target price to 62 sen from 45 sen previously, after revising its earnings forecasts higher.

The research house added that the current two overhangs – the reclassification of the RM1.48bil Kraken debt, which should happen in the coming months, and the write-back of impairments – if lifted, should lead to a re-rating of the stock.

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