• Keep BUY, new MYR0.73 TP from MYR0.70, 36% upside.After updating the ESG scoresheet for the energy sector stocks under our coverage, we raise our ESG score for Bumi Armada to 2.9 from 2.7 – and adjust our TP accordingly. We favour Bumi Armada for its dedication to emissions tracking, strong waste management practices, and commitment to achieving net zero by 2050.

• The positives. Since the launch of its Net Zero by 2050 target last year, Bumi Armada has made substantial strides in its sustainability efforts. The company has a strong focus on monitoring and aligning GHG emissions with reporting principles, enabling a more robust understanding of its Scope 1 and 2 emissions as of 2023, following alignment with GHG protocol classifications. Additionally, the group’s recent decline in overall emissions and its effective waste management efforts stand out as notable achievements in its sustainability journey.

• Areas of improvement. In its FPSO operations, Bumi Armada reported 128.7 tCO2e per thousand tonnes of production for Scope 3 emissions, a level slightly above the International Association of Oil & Gas Producers or IOGP baseline for 2022. However, we note that the group has ongoing efforts to support clients in identifying Scope 3 reduction opportunities. Regular updates on its low carbon and/or renewable energy (RE) initiatives as well as a clear set of medium-term goals would provide greater clarity and confidence in its move towards achieving net zero. Enhancing the transparency and frequency of reporting on these fronts could also strengthen its alignment with global standards and investor expectations.

• ESG score update. Reflecting its recent advancements, Bumi Armada’s ESG score has been raised to 2.9 from 2.7. We are upbeat on its comprehensive emissions tracking, which includes Scope 1, 2, and 3 emissions, as well as intensity metrics. This level of detailed reporting enhances transparency and is in line with best practices, reflecting a robust commitment to achieving its net-zero target by 2050. Additionally, the group’s strong waste management practices support its broader sustainability goals. 

Source: RHB Securities Research - 18 Nov 2024