INVESTMENT HIGHLIGHTS

• Bumi Armada’s (BAB) 2QFY19 earnings rose by >100%yoy to RM78.2m

• Stronger earnings attributable to better revenue contribution from Armada Kraken and Armada Olembendo FPSOs

• OSV utilisation rate in 2QFY19 rose to 51%

• Cost cutting measures continue to bear fruit

• Firm orderbook stands at RM19.8b

• Maintain BUY with a revised TP of RM0.38 per share

2QFY19 earnings of RM78.2m above estimates. BAB’s 2QFY19 reported earnings rose >100%yoy to RM78.2m. This is despite a -18.1%yoy decline in its revenue. This brings its 1HFY19 earnings to RM140.4m which was above ours and consensus’ FY19 full-year earnings estimates at 62.3% and 57% respectively. The decline in revenue is attributable among others to: (i) lower revenue contribution from the OMS segment arising from the completion of LukOil project in the Caspian Sea back in December 2018 and; (ii) lower revenue contribution from Armada TGT FPSO subsequent to the signing of the extension agreement back in August 2018.

FPO (previously FPSO & FGS) segment. Segment revenue was flat year-over-year at RM443.6m while segment profit rose by >100%yoy to RM237.4m. The stronger segment profit is largely attributable to higher revenue contribution from Armada Kraken FPSO and Armada Olembendo FPSO during the quarter.

OMS segment. The Offshore Marine Segment (OMS), an amalgamation of the offshore support vessel (OSV) remains in the red with its revenue declined by -55.7%yoy to RM92.0m while seeing a loss of -RM11.1m. This is mainly due to the completion of the LukOil project in the Caspian Sea back in December 2018. However, combined OSV utilisation rate has improved to 51% from 39% in 1QFY19 due to higher offshore activities taking place during the quarter.

Impact on earnings. Due to the better-than-anticipated earnings as well as internal cost initiatives that is bearing fruit; we are revising our FY19F and FY20F earnings up by +21.9% and +25.4% to RM274.7m and RM299.1m respectively.

Source: MIDF Research - 3 Sept 2019