PETALING JAYA: CIMB Research is maintaining a bullish outlook on Bumi Armada Bhd
, reporting that the group’s core net profit for the first half of the year (1H24) had more than doubled to RM505.5mil.
The brokerage said the group’s 1H24 results were in line with its expectations at 54.8%, while having exceeded consensus projection at 60.3%, before adding that Bumi Armada also saw marginal quarterly net earnings growth due to a higher share of joint venture (JV) contribution.
On this note, it said the Armada Sterling V floating, production, storage and offloading (FPSO) vessel had registered increased revenue and lower cost during the standby period, after first oil was achieved in January 2024.
“We expect contributions from Armada Sterling V FPSO to rise further in 3Q24 as it has successfully achieved final acceptance on July 1. This marks the commencement of its firm nine-year charter period that has a total contract value of US$2.1bil, with an option to extend annually for an additional seven years,” said CIMB Research.
Based on Bumi Armada’s 30% stake in the JV, the research house expects the Armada Sterling V to contribute 7% to 7.5% annually to the group’s core net profit.
At the same time, the research house opined that an extension of the FPSO TGT charter contract, which is expiring in November, will be a key re-rating catalyst for Bumi Armada.
CIMB Research said the group is actively discussing an extension with the charterer, London-based Pharos Energy, for a period of five years, up to 2031.
It reported that Pharos Energy, previously knowns as Soco International, recently confirmed a commitment to a new two-well programme this year, while the existing production sharing contract for the FPSO TGT field has secured a two-year licence extension until Nov 2026, with on-going negotiations to extend it further by another five years.
CIMB Research believes the arrangement gives Bumi Armada confidence in securing an extension for the FPSO TGT charter contract.
The research outfit is also keeping its earnings forecasts for Bumi Armada from the financial years ending December 2024 to December 2026 unchanged, while also maintaining a “buy” on the stock with a target price of 78 sen.
