Kenanga Research said its earnings assumptions for the company remained conservative.
PETALING JAYA: After achieving first oil at Sterling 5 floating, production, storage and offloading (FPSO) vessel, analysts expect Bumi Armada Bhd
and project partner to secure final acceptance from the client by the end of the first quarter 2024 (1Q24).
Since it has not provided a date for the asset’s final acceptance at this juncture, Kenanga Research said its earnings assumptions for the company remained conservative with no contribution from FPSO Sterling 5 factored into the 4Q23 and 1Q24.
It said Bumi Armada had initially projected to achieve first oil by last November but the actual date was later than anticipated.
In its financial year 2024 (FY24) projections for Bumi Armada, Kenanga Research had assumed a contribution of 4.5% from its Sterling 5 to the group’s total earnings base.
The research house maintained its sum-of-parts target price of 58 sen a share for Bumi Armada with a “market perform’’ call on the stock.It liked the company for its better net gearing position and long-term earnings visibility from its sizeable order book in excess of RM20bil, including potential extensions.
There is also potential for long-term growth on the back of multiple potential FPSO and liquefied natural gas opportunities.
However, post the Kraken recovery, the group’s earnings will be flat in the absence of any new projects.
Kenanga Research added the risks to its call on Bumi Armada included further delay in Sterling 5 FPSO joint venture first oil (beyond FY24), cost overruns and delays for engineering, procurement, construction and commissioning and FPSO contract extensions are not exercised for core FPSO assets.
