Buying opportunity ARMADA 5210 BUMI ARMADA BERHAD after month-on-month decline?

  Buying opportunity  ARMADA 5210 BUMI ARMADA BERHAD after month-on-month decline?




Bumi Armada Bhd has lost some 25.4% in the past month to close at 47 sen on June 30.


So much so that analysts feel the stock has been oversold and promptly urged investors to buy Bumi Armada.


Investors can look forward to the counter surpaassing its 52-week high of 73 sen seen in March this year.


It was trading at a year low of 32 sen last July.


Hong Leong Investment Bank (HLIB) Research has upgraded Bumi Armada to ‘buy’ from sell with an unchanged of target price of 54 sen.


It believes the risk and reward ratio of the stock has turned attractive following the month-on-month decline.


The research house had prior to the recent revised recommendation was concerned over the shut-in of Armada Kraken FPSO following the failure of critical hydraulic submersible pump transformers.


Concerns over the shut-in was expected as Armada Kraken FPSO accounted for some 35% of the group’s FY22 revenue.


As such, the lack of clarity from the management, coupled with the anticipated negative impact from the FPSO shutdown, triggered a knee-jerk selling reaction from investors.


HLIB said most of the negatives would have now priced in, given the subsequent slide in the share price.


Therefore, this is an opportunity for bottom fishing.


Technically, Bumi Armada is grossly oversold, with indicators on the mend.


The research house said a successful breakout above 48 sen immediate resistance will spur prices toward 50 sen -54 sen-57 sen with cut lost at 39 sen.


Such optimism stems from the resumption of operations of Armada Kraken FPSO and is currently running at 60% of its pre-shutdown production levels.



AmInvestment Research is more upbeat, maintaining its buy call on the counter with a SOP fair value of 69 sen.


Its forecasts are unchanged for now, await further clarity from management regarding the latest development of remediating Armada Kraken FPSO.

 

AmInvest opined that despite the vessel reaching 60% of pre-shutdown production level, the group may not be able to resume the charging of charter fees to the client given the still-constrained availability of the vessel.  


On a positive note, Bumi Armada is venturing into the burgeoning carbon capture and storage space.


This is following a MoU with Navigator Holdings, the owner and operator of the world’s largest fleet of handysize liquefied gas carriers, to establish a JV company to provide CO2 shipping and injection solutions in UK.


The 50%-owned JV aims to provide an end-to-end solution for carbon emitters to capture, transport, sequester and store carbon dioxide emissions in line with UK’s Industrial Decarbonisation Strategy.  


Apparently, Bumi Armada and Navigator are in initial discussions with a number of emitters.


If these discussions turn out to be successful, the group anticipates the first shipment of CO2 to take place 3 years after taking the final investment decision.


In the short-to-mid term, investors could bank on the Armada Kraken FPSO to bring more results to the group.
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