Bumi Armada remains RHB's top sector pick

KUALA LUMPUR: RHB Research is keeping Bumi Armada Bhd as its top sector pick as its recent results outperformed expectations.

The offshore energy services provider recently said 1Q22 core profit surged 21% year-on-year on lower depreciation and finance costs to RM178mil, which was 29% and 30% of RHB's and consensus full-year estimates.

"Apart from bidding for new FPSO projects, it is also exploring new opportunities such as floating LNG (FLNG) and carbon capture projects in the longer run.

"Bumi Armada remains our sector Top Pick for its undemanding valuation (3.8x FY23F P/E) and strengthening balance sheet, led by stable FPSO operations and continuous asset monetisation," said RHB.

The broker increased its FY22-24 earnings estimates by 3% to 4% after lowering finance and depreciation charges.

It maintained "buy" but lowered its target price to 58 sen from 64 sen after rolling forward its valuation base year to FY23.

Meanwhile MIDF Research, which reiterated its "buy" recommendation and target price of 72 sen, is optimistic over the performance of the group's FPSO segment and potential securement of new contracts on the back of increasing oil and gas prices in the near-term.

"The global FPSO market size is expected to rise from US$7b to US$17b by 2027, in tandem with the high oil prices enticing upstream and midstream activities, the rising number of offshore reserves discovery, and the increasing demand for hydrocarbons worldwide – all which would benefit BAB’s operations in the next coming quarters.

"We reiterate our positive stance on Bumi Armada, based on its robust orderbook and balance sheet, as well as its large network of operations," it said.

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Bumi Armada , FPSO , oil and gas , energy


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