Bumi Armada Sterling 5. Photo courtesy of Oil & Gas World
KUALA LUMPUR: Bumi Armada Bhd
's 30%-owned Armada Sterling floating production, storage and offloading (FPSO) is anticipated to secure final acceptance from the client by end-1QFY24, despite having achieved first oil later than initially guided, said Kenanga Research.
The offshore facilities and services provider said the Armada Sterling 5 FPSO achieved first oil on Jan 7, 2024, and will now undergo acceptance tests to attain final acceptance, a prerequisite for the commencement of the FPSO charter.
While the group has not provided a specific date for the asset's final acceptance, Kenanga has maintained its earnings forecasts as it assumes contribution to commence by 2QFY24.
"It's important to highlight that Armada will receive the full charter income only upon the final acceptance by the client," it said in a company update.
"We maintain our sum-of-parts target price of 58 sen and 'market perform' call. Our valuation reflects a 5% discount to factor in a two-star ESG rating as appraised by us."
Kenanga said it likes Bumi Armada for its better net gearing position of 0.7x in FY22 compared to 1.5x in FY21 and long-term earnings visibility from a sizeable order boom in excess of RM20bil including potential extensions.
It also favours the company's potential for long-term growth on the back of multiple potential FPSO and LNG opportunities.
However, it noted that, post-Kraken recovery, the group's earnings will be flattish in the absence of any new project.
Risks to its forecast include a further delay in Sterling 5 JV's first oil, cost overruns and delays for EPCC projects and FPSO contract extensions not being exercised for core FPSO assets.
