PETALING JAYA: Bumi Armada Bhd
is well-positioned to capture rising upstream demand from elevated crude oil prices amid escalating Middle East tensions, its growth outlook underpinned by stronger financial discipline, cash flow and order book visibility, MBSB Research says.
In a note, the research house said sustained strength in oil prices is expected to incentivise major oil producers to increase capital expenditure, particularly in upstream development activities aimed at securing and expanding production capacity.
MBSB Research noted that Bumi Armada stands to benefit from this, given its established presence in the floating production, storage, and offloading (FPSO) segment and strong operational track record as an upstream support service provider.
The company recently proposed a RM1.95bil capital reduction exercise, alongside a request for shareholders’ approval to undertake share buy-backs, aimed at eliminating its RM1.45bil in accumulated losses at December 2024 and enhancing its balance sheet.
“The accumulated losses were largely attributable to impairment charges, particularly those linked to the underperformance and lower uptime availability of the Armada Kraken FPSO,” MBSB Research said.
“This was further compounded by weaker vessel utilisation and declining day rates within the offshore support vessel segment, which weighed on overall profitability in prior periods.”
According to the research house, the proposed capital reduction would effectively reset its retained earnings position to a positive balance of RM498.59mil on a company level, and lift retained earnings on a group level by RM262.98mil to RM2.21bil following the exercise.
“From a balance sheet perspective, the capital reduction represents an accounting adjustment that allows the company to eliminate legacy losses without impacting its underlying cash position,” the research house said.
“The exercise effectively normalises retained earnings, thereby improving the company’s financial position and removing constraints typically associated with deficit positions.”
It added that the proposed share buy-back mandate reinforces Bumi Armada’s intent to enhance shareholder value, especially at a juncture where the company’s balance sheet has strengthened and valuation may not fully reflect underlying fundamentals.
MBSB Research said the capital restructuring also comes on the back of improved cash flow generation, with the group recording operating cash flow of RM1.04bil and a cash balance of RM1.32bil at the end of the financial year ended Dec 31, 2025 (FY25).
The research house further pointed out that the group’s balance sheet resilience is further supported by a sizeable and stable order book of RM7.9bil as at the end of FY25, providing long-term earnings visibility.
MBSB Research maintained its “buy” recommendation on the stock, with an unchanged target price of 44 sen per share.
