Armada Olombendo
PETALING JAYA: Bumi Armada Bhd
may face constraints in bidding for large floating production, storage and offloading (FPSO) projects independently, following the lapse of the proposed merger with the offshore segment of MISC Bhd.
Last month, Bumi Armada and MISC mutually agreed to terminate the proposed merger, citing limited strategic fit in.
While the withdrawal prevented potential integration risks, Hong Leong Investment bank (HLIB) Research said it removed an avenue for Bumi Armada to leverage MISC’s stronger balance sheet, scale and client relationships in bidding for larger FPSO contracts.
“Without a strategic partner of similar size, Bumi Armada may face funding and execution constraints in pursuing sizeable new projects independently, particularly given the capital-intensive nature of FPSOs,” the research house said in a report post the company’s earnings for the second quarter ended June 30, 2025 (2Q25).
Bumi Armada reported a 2Q25 core net profit of RM98.4mil, bringing first-half of the year (1H25) figure to RM282mil, which was down about 43% year-on-year.
“The results were below our expectations, accounting for only 41% of our full-year forecast, while tracking within consensus at 50%. The variance in our forecasts were mainly due to higher-than-expected operating costs and lower-than-expected contribution from Armada Kraken FPSO,” HLIB Research said.
In light of the weaker operational performance, HLIB Research has cut its financial year 2025 (FY25) to FY27 earnings forecasts by 8.6% to 11.3%.
On the more positive note, the group’s net debt continued to decline for 21 consecutive quarters to RM1.6bil in 2Q25, from RM8.7bil in 1Q20. It said the stock is currently trading at 3.4 times FY26 earnings, which is the lowest among its peers.
