Bumi Armada ice class vessels sale to improve recurring earnings


KUALA LUMPUR: Bumi Armada Bhd's recurring earnings in FY22 and FY23 are expected to improve following the sale of its ice class vessel companies, says RHB Research.

In a report, the research firm said the absence of losses from these companies will bolster recurring earnings by 6% to 8% over the two financial years.

This is despite the sale incurring a one-off disposal loss of RM25mil, which is equivalent to 4% of RHB's FY22 earnings forecast.

Subsequently, RHB said it projects an improved balance sheet on the back of healthy operating cash flow, led by stable FPSO operations and continuous asset monetisation.

"We maintain our target price at 62 sen as we do not incorporate the offshore marine services assets into our valuation.

"Our target price also incorporates a 2% ESG discount, based on a scoring of 2.9," said RHB, while reiterating its "buy" recommendation.

In a bourse filing yesterday, Bumi Armada proposed to dispose of its four wholly owned subsidiaries, which own three ice class vessels, to Russia's PJSC Lukoil for US$44.5mil (RM186.6mil) cash.

The disposal is expected to be completed in 1Q22.

According to RHB, the companies recorded a combined loss after taxation of RM56.6mil in 9M21, and have combined net assets of MYR219.9mil as at 3Q21.

Bumi Armada has said the bulk of the proceeds amounting to about US$38mil will be used to reduce corporate debt while the remaining US$6.5mil will be kept for working capital purposes.
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