Bumi Armada is highly compelling, says HLIB

Bumi Armada is highly compelling, says HLIB

The firm said the company's revenue and profit recognitions were independent from the volatility and movement of crude oil prices.

KUALA LUMPUR: Bumi Armada Bhd's recent share price weakness accentuates an attractive bargain hunting opportunity as the nature of the company's floating production system and offloading (FPSO) business is stable due to its recurring income and cash flows, Hong Leong Investment Bank Bhd (HLIB) said.

The firm said the company's revenue and profit recognitions were independent from the volatility and movement of crude oil prices.

"At about only 3.4x FY22 earnings currently, we think that Bumi Armada is highly compelling given its foothold in the FPSO business which provides steady recurring income, coupled with speedy enhancement in its debt profile.

"The recent weakness in Bumi Armada's share price accentuates an attractive bargain hunting opportunity.

"Bumi Armada is our top pick for the oil and gas (O&G) sector," it said in a note today.

HLIB said amid the volatility over the past few weeks due to the ongoing developments in regards to the Russia-Ukraine crises, Bumi Armada's share price fell about 30 per cent from a high 57.5 sen on Feb 7 and it last traded at 40.5 sen.

"From our findings, we gather that the group's subsea construction vessels – Armada Installer and Armada Constructor – are currently contracted with Lukoil in the Caspian Sea up to end-2022 under a contract value of US$50 million.

"Based on our check with the group's management, there has been no ground indication of default or non-payment risk from Lukoil," it added.

HLIB has maintained its "Buy" call on Bumi Armada, with an unchanged target price of 84 sen.

https://www.nst.com.my/business/2022/03/781731/bumi-armada-highly-compelling-says-hlib