KUALA LUMPUR: Bumi Armada Bhd
share price fell by nearly 22 per cent in early trade following the unplanned shutdown of its Armada Kraken floating production storage and offloading (FPSO) vessel operating in the North Sea near the United Kingdom.
At 10.18 am, the counter declined 13.5 sen or 21.26 per cent to 50 sen with 121.64 million shares transacted.
Hong Leong Investment Bank (HLIB) said in a note today that Armada Kraken FPSO has a daily charter rate of about US$480,000 per day (US$175 million per year) and this accounts for approximately 35 per cent of the group’s revenue contribution in the financial year 2022 (FY2022).
"We are negative on this development. While we acknowledge we do not have clarity of Kraken’s shut-in timeline yet, we decide to make an arbitrary estimate of a six-month downtime for the said FPSO.
"We trim our financial year (FY) 2023 net profit forecast by 38 per cent while leaving FY2024-2025 earnings estimates unchanged,” it said.
As such, HLIB has downgraded Armada to a 'sell' call with a lower target price (TP) of RM0.54.
Echoing HLIB, CGS-CIMB Securities Sdn Bhd also degraded Bumi Armada with a 'hold' from 'add' call and lower TP of 69 sen.
"We do not think Bumi Armada’s share price will perform until the Kraken issue is resolved.
"We also cut our FY2023 core net profit forecast by 47 per cent as we factor in loss of charter-hire revenue and repair and maintenance costs for the Kraken,” it said.
However, CGS-CIMB said a faster-than-expected resolution of the technical issues faced by FPSO Kraken and improving prospects for Bumi Armada to secure longer-term and more substantial work for its two Caspian Sea pipelay vessels would drive their growth further.
"Also, we expect TotalEnergies to award the commercial deal for FPSO Cameia sometime this year.
"We also believe the company may be bidding for additional FPSO projects and will avoid a rights issue for any future FPSO project wins as Bumi Armada may opt for joint venture partnerships for new FPSO projects,” it said.
Meanwhile, Bursa Malaysia has suspended the short selling of Bumi Armada shares for the rest of the day under proprietary day trading (PDT) and intraday short selling (IDSS) after its stock dropped more than 15 sen, or 15 per cent, from the reference price.
Trading of the oilfield services company's shares and structured warrants will only be activated the following trading day, June 7, at 8.30 am. - Bernama
