ARMADA (5210) - Bumi Armada - Order book gets more buoyant
Target RM1.50 (Stock Rating: ADD)
Bumi Armada has ventured into the floating LNG business with an RM1.1bn contract to supply a floating storage unit (FSU) to ElectroGas Malta. Spanning over 18 years with an average contract value of RM61m p.a., the contract is not large but it offers Bumi Armada a good start in a new venture and raises the company’s order book to a new record of an estimated RM25.6bn. We continue to value the stock at 15x CY16 P/E, at parity with our target market P/E. We maintain our Add call, with this new venture and a strong FPSO contract pipeline as potential re-rating catalysts.
What Happened
Bumi Armada has entered into contracts with ElectroGas Malta for the conversion, supply, operation and maintenance of an FSU for a project relating to the construction and operation of an LNG-receiving terminal located at Delimara, Malta. The effective date of the contracts is 13 Apr 2015 for a firm period of 18 years and two months. The estimated value of the contracts is approximately US$300m (RM1.1bn). The FSU is expected to commence operations in Delimara in 2016.
What We Think
With an average contract value of RM61m p.a., the contract is not large but it is a positive surprise nevertheless. It gives Bumi Armada a new long-term income stream to complement its existing long-term FPSO contracts and boosts the company’s order book by 4.5% to an estimated RM25.6bn, a new high. The contract falls under a new and fourth business division – floating LNG. Other business divisions are FPSO, offshore support vessels and transport and installation. Bumi Armada has identified an LNG carrier as the conversion vessel. We understand that the acquisition of the carrier will be finalised over the next few weeks, with the conversion likely to take place at Keppel’s yard. We maintain our forecasts for now as the FSU is expected to be delivered to ElectroGas in 2Q-3Q next year.
What You Should Do
We advise investors to accumulate the stock. We continue to like Bumi Armada for its solid earnings visibility given the long-term nature of its nine FPSO contracts (Figure 1) and its good leverage in the international market. The company is currently bidding for three more FPSO contracts - one each in Nigeria, Namibia and Angola.
Source: CIMB Daybreak - 16 April 2015
Target RM1.50 (Stock Rating: ADD)
Bumi Armada has ventured into the floating LNG business with an RM1.1bn contract to supply a floating storage unit (FSU) to ElectroGas Malta. Spanning over 18 years with an average contract value of RM61m p.a., the contract is not large but it offers Bumi Armada a good start in a new venture and raises the company’s order book to a new record of an estimated RM25.6bn. We continue to value the stock at 15x CY16 P/E, at parity with our target market P/E. We maintain our Add call, with this new venture and a strong FPSO contract pipeline as potential re-rating catalysts.
What Happened
Bumi Armada has entered into contracts with ElectroGas Malta for the conversion, supply, operation and maintenance of an FSU for a project relating to the construction and operation of an LNG-receiving terminal located at Delimara, Malta. The effective date of the contracts is 13 Apr 2015 for a firm period of 18 years and two months. The estimated value of the contracts is approximately US$300m (RM1.1bn). The FSU is expected to commence operations in Delimara in 2016.
What We Think
With an average contract value of RM61m p.a., the contract is not large but it is a positive surprise nevertheless. It gives Bumi Armada a new long-term income stream to complement its existing long-term FPSO contracts and boosts the company’s order book by 4.5% to an estimated RM25.6bn, a new high. The contract falls under a new and fourth business division – floating LNG. Other business divisions are FPSO, offshore support vessels and transport and installation. Bumi Armada has identified an LNG carrier as the conversion vessel. We understand that the acquisition of the carrier will be finalised over the next few weeks, with the conversion likely to take place at Keppel’s yard. We maintain our forecasts for now as the FSU is expected to be delivered to ElectroGas in 2Q-3Q next year.
What You Should Do
We advise investors to accumulate the stock. We continue to like Bumi Armada for its solid earnings visibility given the long-term nature of its nine FPSO contracts (Figure 1) and its good leverage in the international market. The company is currently bidding for three more FPSO contracts - one each in Nigeria, Namibia and Angola.
Source: CIMB Daybreak - 16 April 2015
