ARMADA (5210) : Bumi Armada - Madura sets sail
Target RM2.35 (Stock Rating: ADD)
Bumi Armada closes FY14 with the finalisation of the Madura FPSO contract, which takes the company’s order book to a new high of an estimated RM23.4bn. Madura also marks Bumi Armada’s second FPSO contract this year and expands the company’s FPSO fleet to nine vessels, its biggest ever. Management has now set its sights on four additional FPSO contracts. Our target price drops as we now value the stock at 19.5x CY16 P/E, still at a 30% premium over our revised target market P/E of 15x, from 16.3x previously. We maintain our Add call with a strong FPSO contract pipeline as potential re-rating catalyst.
What Happened
Bumi Armada announced that it has signed the Madura floating production, storage and offloading (FPSO) contract with Husky-CNOOC. The contract is for a firm 10-year, US$1.18bn charter, with five annual extension options worth US$147m. The FPSO vessel is expected to commence operations at the Madura BD field in Indonesia in 4Q16. The contract was secured by 50%-owned unit, PT Armada Gema Nusantara, on 19 Aug 2014.
What We Think
We are pleased that Bumi Armada has finalised the Madura contract after three extensions. Madura is Bumi Armada’s ninth FPSO contract and the second secured this year after the US$2.9bn 1506 contract awarded in Mar. The 1506 contract is the company’s biggest ever. Armed with nine FPSO vessels, the company remains the world’s fifth largest FPSO operator by fleet size. Based on Bumi Armada’s 50% stake, Madura gives the company’s order book a 9% boost to hit a new record of an estimated RM23.4bn, second only to SapuraKencana’s RM26.2bn order book. Bumi Armada also has extension options worth RM11.8bn. The company is currently bidding for four FPSO contracts - one each in Ghana, Nigeria, Namibia and Angola. Madura appears to be outgoing CEO Hassan Basma’s last contract before his resignation takes effect on 1 Jan 2015. He will stay on as a consultant, working alongside acting CEO Chan Chee Beng.
What You Should Do
Take advantage of the share price correction and accumulate the shares. Despite the current oil price weakness, we continue to like Bumi Armada for its solid earnings visibility given the long-term nature of FPSO contracts, and its good leverage in the international market. All nine FPSO contracts are outside Malaysia and have no oil price connections.
Source: CIMB Daybreak - 12 December 2014
Target RM2.35 (Stock Rating: ADD)
Bumi Armada closes FY14 with the finalisation of the Madura FPSO contract, which takes the company’s order book to a new high of an estimated RM23.4bn. Madura also marks Bumi Armada’s second FPSO contract this year and expands the company’s FPSO fleet to nine vessels, its biggest ever. Management has now set its sights on four additional FPSO contracts. Our target price drops as we now value the stock at 19.5x CY16 P/E, still at a 30% premium over our revised target market P/E of 15x, from 16.3x previously. We maintain our Add call with a strong FPSO contract pipeline as potential re-rating catalyst.
What Happened
Bumi Armada announced that it has signed the Madura floating production, storage and offloading (FPSO) contract with Husky-CNOOC. The contract is for a firm 10-year, US$1.18bn charter, with five annual extension options worth US$147m. The FPSO vessel is expected to commence operations at the Madura BD field in Indonesia in 4Q16. The contract was secured by 50%-owned unit, PT Armada Gema Nusantara, on 19 Aug 2014.
What We Think
We are pleased that Bumi Armada has finalised the Madura contract after three extensions. Madura is Bumi Armada’s ninth FPSO contract and the second secured this year after the US$2.9bn 1506 contract awarded in Mar. The 1506 contract is the company’s biggest ever. Armed with nine FPSO vessels, the company remains the world’s fifth largest FPSO operator by fleet size. Based on Bumi Armada’s 50% stake, Madura gives the company’s order book a 9% boost to hit a new record of an estimated RM23.4bn, second only to SapuraKencana’s RM26.2bn order book. Bumi Armada also has extension options worth RM11.8bn. The company is currently bidding for four FPSO contracts - one each in Ghana, Nigeria, Namibia and Angola. Madura appears to be outgoing CEO Hassan Basma’s last contract before his resignation takes effect on 1 Jan 2015. He will stay on as a consultant, working alongside acting CEO Chan Chee Beng.
What You Should Do
Take advantage of the share price correction and accumulate the shares. Despite the current oil price weakness, we continue to like Bumi Armada for its solid earnings visibility given the long-term nature of FPSO contracts, and its good leverage in the international market. All nine FPSO contracts are outside Malaysia and have no oil price connections.
Source: CIMB Daybreak - 12 December 2014
