PETALING JAYA: Analysts are concerned over Bumi Armada Bhd
’s first-half 2026 (1H26) earnings as well as the persistently low uptime of its four floating production, storage, and offloading (FPSO) vessels, which was below 98%.
UOB Kay Hian (UOBKH) Research said FPSO Kraken had experienced operational issues since the fourth quarter of 2025 (4Q25), resulting in consistently low uptime for three quarters in a row.
“In our view, this is more serious versus the 2023 operational setback of FPSO Kraken due to the failure of hydraulic submersible pump transformers.
“While that incident had a critical earnings and market impact, we note the uptime was low at 93% in 2Q23, but recovered quickly to 98% in 3Q23,” UOBKH Research stated in a report on the support services provider.
Despite prior knowledge of FPSO Armada Kraken’s operational issues, the research firm said the impact was still unexpected.
“To recap, uptime in 4Q25 and 1Q26 were 96.9% and 94.4%, respectively, and the 2Q26 uptime had a slight quarter-on-quarter (q-o-q) recovery to 95.8%.”
It said assuming the other three FPSOs were operating at 98% uptime, FPSO Kraken’s uptime was at 85% in 2Q26.
“Hence, the quarterly revenue improvement in 2Q26 can be explained by the absence of a compensation payable for Kraken’s extension – estimated to be a provision of RM5mil – and higher revenue in tandem with higher uptime q-o-q,” the research house said.
According to UOBKH Research, Bumi Armada’s management may bring forward planned maintenance works for Kraken.
As for Bumi Armada’s earnings, it said the 1H26 figure comprised 38% of its forecast and 32% of consensus’ forecasts, respectively.
With that, UOBKH Research cut the company’s financial year 2026 (FY26) to FY28 earnings forecasts by 28%, 17% and 3%, respectively.
It retained a “hold” call on the counter with a target price of 35 sen a share, implying eight times its 2027 price-to-earnings ratio, adding that a wait-and-see-approach is a better option for now.
“Bumi Armada is now focused on conserving enough cash for future project bids, but its inability to replenish its order book as it embarks on a different and riskier strategy with no proven results yet, coinciding with a poor operational track record, further clouds any possible catalysts for the stock,” UOBKH Research noted.
Meanwhile, Kenanga Research maintained a “market perform” call on Bumi Armada with a lower target price of 35 sen, from 36 sen, adding that the company’s near-term earnings outlook was modest due to the lack of new project wins.
“Upstream capital expenditure (capex) for Projects Akia and Kojo is not anticipated for the next two years, though sustained exploration expenses may continue to drag short-term profitability.
“The group also signed a production sharing contract for Jalu in Indonesia, with no final investment decision announced yet,” Kenanga Research added.
It noted that Bumi Armada is in a net debt position of RM758mil, with operating cash flows expected to be between RM500mil and RM600mil per annum.
This means that by the end of 2026, the group should be able to bring its debt down to lower levels, leaving more room for potential share buybacks and dividends.
Kenanga Research said Bumi Armada has a better net gearing position as it has not incurred significant capex over the past five years, as there have been no major FPSO wins.
It added that the group also has strong cash flow generation despite ageing FPSO assets, alongside potential balance sheet optimisation efforts.
