According to AllianceDBS Research, Bumi Armada has reasonable grounds to appeal against the decision of the Australian Supreme Court, which had ruled in favour of WEJ over a contract to provide floating production storage and offloading services on Sept 30,2011.
PETALING JAYA: The loss of its claims against Australia’s oil firm Woodside Energy Julimar Pty Ltd (WEJ) will unlikely have a material impact on the financial position of BUMI ARMADA BHD.
According to AllianceDBS Research, Bumi Armada has reasonable grounds to appeal against the decision of the Australian Supreme Court, which had ruled in favour of WEJ over a contract to provide floating production storage and offloading services on Sept 30,2011.
The brokerage maintained its “buy” rating on Bumi Armanda, with a target price of 75 sen based on 13.8 times estimated earnings for the financial year ending Dec 31,2020. The target price implied a price-to-book value of 1.2 times. “We believe that the worst for Bumi Armada is over. The company has resolved its debt issues and is improving its operations progressively as seen in nine months ended September 2019 figures, ” AllianceDBS Research explained.
“Earnings are expected to be stable going forward. The company is focusing on improving its existing operations and is not planning to venture into any new projects until it lowers its net gearing significantly, ” it added.
Bumi Armada’s shares fell one sen to close at 41 sen yesterday.
On the recent court outcome, AllianceDBS Research said it was not expected to have a material impact on Bumi Armada’s financials, as it had not imputed the scenario of Bumi Armada winning the arbitration case, as it had been ongoing for almost four years without any verdict.
“We believe that Bumi Armada would have reasonable grounds to appeal against the decision, but we will continue to exclude the instance of Bumi Armada coming out with any form or amount of compensation, to be conservative, ” it said.
In a filing with Bursa Malaysia on Tuesday, Bumi Armada announced its claim against WEJ for the termination of a contract for its floating production storage and offloading unit (FPSO) vessel Armada Claire back in 2016 has been dismissed in court.
The FPSO specialist said its subsidiary Armada Balnaves Pte Ltd would need to pay WEJ A$1.57mil (RM4.33mil) for reimbursement of miscellaneous charges.
Despite the charges, Bumi said the firm was entitled to a payment of US$2mil for unpaid milestone claims and A$341.2mil for unpaid invoices.
“The Supreme Court ruled in favour of Woodside Energy on Armada Balnaves’ main claim of repudiation of the contract.
In 2016, Woodside terminated the contract with Armada Claire FPSO that was operating at the Balnaves Field, offshore north-western Australia since August 2014.
Following the termination, Bumi Armada, via its Armada Balnaves subsidiary, took legal action against Woodside seeking a A$283.5mil (RM1.15bil) compensation.
The trial for the case was held in February and March 2019, and last week the court found in favour of Woodside and dismissed Bumi Armada’s A$283.5mil compensation claim.
Bumi Armada said the company is currently reviewing the judgment and considering possible grounds of appeal. Any appeal is to be lodged by Feb 14.
https://www.thestar.com.my/business/business-news/2020/01/30/worst-for-bumi-armada-is-over-debt-issues-resolved
