Bumi Armada's 1HFY20 core net profit of RM22mil exceeded Kenanga's and consensus expectations at 71% and 77% of of full-year estimates respectively.
It said the better-than-expected earnings were owing to stronger-than-expected floating, production, and operations (FPO) segment contribution thanks to improved vessel availability in Armada Kraken FPSO.
"Given the long-term contracting nature of its FPSOs, we view the group to be fairly earnings resilient against the current oil down-cycle.
"However, we are still mildly concerned over the group’s borrowings level (net-gearing at 2.8x, with total borrowings of RM9.3b)," it said.
The research house recommends a shorter-term trading approach towards the stock owing to its high gearing.
"We recommend traders to start taking profit on strength when the share price exceeds our targer price," it said.
Kenanga has an "outperform" call and target price of 30 sen on the counter.
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