KEY INVESTMENT HIGHLIGHTS

• 1HFY24 earnings up +58%yoy, came in above expectations
• Revenue up +23%yoy due to higher contribution from Olembendo and Kraken
• Promising prospects for TGT-1 extension, Sterling V commencing charter rate, Akia PSC appraisal, Bluestreak JV
• Maintain BUY with a revised target price of RM0.85

Maintain BUY, revised TP: RM0.85. Bumi Armada Berhad (BAB)'s 1HFY24 earnings came in above our and consensus' full year expectations at 67%. We maintain our BUY call and revise our target price slightly upward to RM0.85 (previously RM0.84) as we rollover our valuation to FY25.

1HFY24 PATAMI up +58%yoy. BAB's 1HFY24 revenue gained +23.3% to RM1.21b, while normalised earnings gained +58.4%yoy to RM506.4m. The improved performance was due to higher contribution from Armada Kraken FPSO and Armada Olombendo FPSO, offset by lower other income mainly due to the gain on disposal of vessels in 1HFY23. 2QFY24 saw 100% of average uptime for all FPSOs and FSUs.

Operations segment profit gained +56%yoy. 1HFY24 revenue increased by +57.8%yoy to RM1.2b, while earnings gained +56.2%yoy to RM799m. Revenue increased due to settlement of the escalation of the operating fee of Armada Olombendo FPSO; in comparison to the lower revenue in 1HFY23 which was reduced by the failure of Armada Kraken FPSO's hydraulic submersible pump (HSP) transformers.

Others segment earnings down 8-fold. 1HFY24 revenue rose +12.3%yoy to RM18.3m due to lower revenue from engineering services.

Conversely, earnings dropped to a deficit of -RM30.6m from a deficit of - RM7.7m in 1HFY23. The lower earnings were mainly due to higher foreign exchange loss arising from translation of intercompany balances denominated in foreign currency in 1HFY24.

USD59m debt repaid. The group had repaid its debt totaling to USD59m (approx. RM258.3m) in 2QFY24, with net gearing at 0.44x - the lowest since FY15. Meanwhile, Armada's orderbook stood at RM12.1b as of 2QFY24, with 72% from its wholly owned FPO units. Certain contracts contain extension options beyond the firm contract period with a total estimated value of RM10.9b. For updates on 2QFY24 charter period of FPO units, refer to Table 1.

Source: MIDF Research - 23 Aug 2024