Posted by Felix888999 > 2024-02-28 19:23 | Report Abuse

After lesson learnt from Kraken shut in incident, any bad news just throw to the market. You got chance to buy it back.😎

Posted by nikicheong > 2024-02-28 19:36 | Report Abuse

Bumi Armada Debt Evolution:

1) Table: https://i.ibb.co/5x8RfWW/armada-23q4-table.png
2) Time Series: https://i.ibb.co/zSdkYkD/armada-23q4.png

Posted by Robert Waters > 2024-02-28 19:39 | Report Abuse

I do NOT remember Greedy Gary showing any concerns for shareholders. He was always preoccupied with the personal gain - free or subsidized shares for himself. He never even cared to exercise basic decency. Special resolutions were made for HIS SOLE benefit, not including others in management.
And as I do not trust this greedy clown, I am not going to let him induce me to sell.
I will wait a bit.
We shall see what his scheme is all about.
Sure not about concerns for shareholders.

Posted by RJ87 > 2024-02-28 19:50 | Report Abuse

U haven’t see the real shitty CEO Leon Harland. RM18B 5 years ago.


Under Gary and Luke, dropped to 3.5B. Don’t complain liao.

Posted by nikicheong > 2024-02-28 21:01 | Report Abuse

The more I think about the depreciation, the worse it seems to be. I recall reading previously that vessels usually see greater depreciation in the firm period, such that by the option period, the depreciation reduces.

Why then based on the analyst presentation slides, are the depreciation for Kraken constant throughout the firm + option period? Makes zero absolute sense. I've never heard of Yinson or any of the global FPSO giants facing this issue.

I wonder why this alternative method is not used: https://i.ibb.co/qkwhB79/b-armada-alternative-scenario.png

Posted by Joshua Lim Cheng Ern > 2024-02-28 21:25 | Report Abuse

Hi, may I know how much of the Kraken contributes to group revenue? Assuming worse case scenario after 2025 no new contract, and it drop to 30% of current revenue, how much damage it will cost the group.

Also, it seems that Armada will have 7 FPSO/FSU combined, we can only assume that this type of impairment might happen in the future to the other 6 (since Kraken impairment had happened in this quarter)

Posted by rohank71 > 2024-02-28 21:26 | Report Abuse

the 3 under JV is not consolidated so only 4 and soon 3 than 2 if we discount Karken.

Posted by nikicheong > 2024-02-28 21:30 | Report Abuse

Weighted average term loan interest rate as at 31 Dec 2023: 8.67%
Weighted average term loan interest rate as at 30 Sep 2023: 8.75%

Another small but positive thing going forward. Debt servicing cost will now slowly start going down assuming no change in US Fed rates. Shows that the loans with the highest interest rates are being paid down / refinanced, which is sound credit management.

If the US Fed cuts rate, the servicing cost will go down even faster. On the other hand, if the US Fed increases rate, the debt servicing cost will increase once again.

Posted by rohank71 > 2024-02-28 21:30 | Report Abuse

niki, I share ur frustration with the bad management. even the board must be taken to task. when u have an accounting policy, u should stick till the end and not move the goal post halfway. credibility down the drain.

Posted by rohank71 > 2024-02-28 21:30 | Report Abuse

however, as far as bz is concerned, all is good. let hold on and buy more at 50 sen.

Posted by nikicheong > 2024-02-28 21:34 | Report Abuse

@Joshua, the Kraken contract will definitely be extended for some years. Safe to say, at least it will be extended for another 3 - 5 years, even in the absence of any new wells being drilled whatsoever. Whether it gets extended until 2042 is a question mark though. The Kraken field is still producing >20k barrels per day and additional drilling has been budgeted for into the field operator's FY2025 planning.

Given that Enquest has indicated it will exercise 1-yearly extensions to the charter, the question then really is, how long will they continue exercising those extensions for? Per their last update, the plan is still until early 2040s. However, Enquest can terminate the contract in the option period with a one year advance notice, and will need to pay for demobilization costs.

Posted by Joshua Lim Cheng Ern > 2024-02-28 21:36 | Report Abuse

In the slides presentation, next possible impairment will be Armada TGT 1 FPSO and Armada Sterling II FPSO (50% JV). The rest is under contract for many years to go.

Posted by Joshua Lim Cheng Ern > 2024-02-28 21:39 | Report Abuse

@nikicheong Thank you for the insight!

Posted by nikicheong > 2024-02-28 21:46 | Report Abuse

@Joshua, Armada TGT1 FPSO will unlikely face such impairment, as it is already at the end of its option period. Highly likely the carrying value of the FPSO is almost next to nothing.

As for Armada Sterling II, it is hard to say, but again, unlikely. There was already some adjustment done in the past for Armada Sterling II. Even if any, the impact should be a lot smaller as it's a significantly smaller project, and Bumi Armada only has a 50% stake.

Posted by Asghlk > 2024-02-28 23:03 | Report Abuse

just realize armada kraken reported 470M impairment loss in 2018

Posted by rohank71 > 2024-02-28 23:37 | Report Abuse

the impairment simply says @ past Armada has miss led with 50M extra paper profits.

Posted by rohank71 > 2024-02-28 23:37 | Report Abuse

that's why I always say its abt cashflow... don't look at NTA to buy a stock.

Posted by rohank71 > 2024-02-28 23:38 | Report Abuse

BA has only 3 FPSO and not 7... that's where we are.

Posted by Felix888999 > 2024-02-28 23:39 | Report Abuse

Asghlk impairment posted for Kraken was RM1,613.2 million in Dec 2018.

Posted by rohank71 > 2024-02-28 23:40 | Report Abuse

the other 3 is just for name sake but cash flow is contolled by the Indians.. strip them off... hence BA trades at a discount to NTA..... now u know why NTA is not important... I prefer BAs NTA at zero... but cashflow strong...

Posted by rohank71 > 2024-02-28 23:41 | Report Abuse

at 50 let's BUY big.

Posted by Felix888999 > 2024-02-28 23:47 | Report Abuse

I queue buy a small batch tmrw. Let the market digest the impairment lost and 70% discounted rate for Kraken after the firm period first.

Posted by Macgyver111 > 2024-02-29 08:08 | Report Abuse

Be careful. PNB might throw Armada shares.

Posted by Macgyver111 > 2024-02-29 08:10 | Report Abuse

PNB owned 12.62% of Bumi Armada shares. That's huge also.

Posted by Gabriel Khoo > 2024-02-29 08:52 | Report Abuse

MBB remains TP at 66c

Posted by Gabriel Khoo > 2024-02-29 09:05 | Report Abuse

4Q23 core net profit of RM313m was substantially above our RM177m estimate, because of stronger-than-expected operating performance by the FPSO Kraken after all the issues relating to its transformer failures in May 2023 were fully resolved in Aug 2023. Also, BAB settled in 4Q23 long-outstanding contractual issues with EnQuest (since 2016) over the technical performance of the FPSO Kraken, and this permitted BAB to record both higher revenues and reverse prior years’ cost provisions in 4Q23 amounting to a total of RM70m. The closure of the OSV division, after the last vessel was sold in 2Q23, also saved BAB RM20m in costs during 4Q23.

Posted by Gabriel Khoo > 2024-02-29 09:06 | Report Abuse

On the other hand, BAB reported a net loss of RM166m in 4Q23, which we did not expect. This arose from RM437m impairment against the FPSO Kraken, as well as a RM77m impairment against the net book value (NBV) of the two subsea construction vessels due to delays in securing new jobs caused by sanctions against Russia. The impairments were partially offset by RM36.4m in writebacks of prior years’ provisions of doubtful debts. The FPSO Kraken impairment was due to the NBV of the asset written down to its value in use (VIU); the latter is calculated as the discounted present value of future cashflows. We explain in detail the reasons for such an impairment on page 3, but emphasise that the contracted cashflows for the FPSO Kraken remain unchanged and therefore, our DCF value of the FPSO Kraken charter contract is not affected by the accounting, non-cash impairment. Trading in BAB shares is likely to be dominated by retail flows, in our view, and the average retail investor may find it difficult to understand the rationale for such an impairment; this caused BAB’s shares to plunge 11% yesterday after the lunchtime release of its FY23 results. In our view, this is an opportunity for investors to accumulate BAB shares for a potential short-term rebound.

Posted by Gabriel Khoo > 2024-02-29 09:07 | Report Abuse

The RM437m impairment against the FPSO Kraken was calculated as the difference between the NBV of the asset and the VIU, with the NBV written down to the lower VIU. For information purposes, if the VIU is higher than the NBV, the NBV is not adjusted higher; however, this is not applicable in the case of the FPSO Kraken. The FPSO Kraken’s NBV is based on the original cost of construction, depreciated on a straight line basis over 25 years to its assumed residual value of 2% of the original cost. The depreciation period of 25 years encompasses both the firm charter period of eight years and the option charter period of 17 years. The VIU is calculated as net present value (NPV) of the future bareboat charter (BBC) cashflows of the FPSO, and the VIU naturally declines with the passing of time because FPSO charter contracts have a finite life. FPSO charter contracts are also split into two distinct periods, i.e. the firm charter period, and the option charter period, with the firm period usually paying the FPSO owner a high daily BBC rate, with BBC rate in the option period typically at just 30% the firm period’s BBC rate (i.e. 70% lower). As such, VIUs of FPSO charter contracts would naturally be higher if the firm charter period has many more years remaining, and become lower once the FPSO contract enters into the option charter period due to the lower BBC rate in the option period. The VIUs of FPSO charter contracts also fluctuate depending on the discount rate applied to calculate the NPV, and higher global interest rates over the past two years would have put the VIUs under pressure, we believe. Specifically in relation to the FPSO Kraken, its eight-year firm charter period is nearing its end on 31 Mar 2025F, upon which the 17-year option charter period will commence at significantly lower BBC rates. Also, the discount rate applied by BAB for the VIU calculation at end-2023 was 8.5%, which BAB confirmed was higher than the rate used in previous years’ calculations. The combination of these factors caused the FPSO Kraken’s VIU at end-2023 to fall under its NBV, resulting in the RM437m impairment. BAB emphasised at the post-results analyst briefing that the contracted cashflows for the FPSO Kraken remain unchanged. Therefore, our DCF valuation of the FPSO Kraken, which is included in our SOP-based target price, is not affected by the accounting, non-cash impairment of RM437m in 4Q23. We have applied a cost of equity discount rate of 13% to discount future FPSO Kraken cashflows to equity (Figure 4). BAB also said that the FPSO Kraken impairments had nothing to do with the failure of transformer equipment on the FPSO in May 2023.

Posted by Gabriel Khoo > 2024-02-29 09:19 | Report Abuse

cashflows. This is potentially a near-term rerating catalyst. Other potential rerating catalysts include the FPSO Armada Sterling 5 (30% owned by BAB) securing final acceptance by the client, ONGC (ONGC IN, Not Rated) in the next few months. The FPSO received first oil at the Kakinada field, offshore India, on 7 Jan 2024, and is currently in the process of stabilising operations upon which it hopes to pass the ’72-hour’ test and then secure the certificate of final acceptance from ONGC. Once final acceptance is received, the FPSO can begin to receive its full contracted BBC rate, and the nine-year firm charter period can begin. At the moment, the FPSO is likely to be receiving a proportion of its full BBC rate, as it is producing oil (the first cargo offload was on 28 Feb 2024), in our view. However, ONGC will not pay the full BBC rate until final acceptance is secured by the FPSO. Meanwhile, a potential extension of the FPSO Armada TGT-1 charter from 14 Nov 2024F to 26 Aug 2031F, could add a further 15 sen to our SOP. A contract extension is currently being negotiated between BAB and the charterer Pharos Energy (PHAR LN, Not Rated). Separately, BAB said at the analyst briefing that it already received credit committee approvals from several banks to refinance the RM1.5bn sukuk borrowings which will be maturing on 4 Sep 2024F. Hence, the probability of a successful refinancing exercise is high, in our view. Downside risks include an unexpected decline in oil prices that may cause a pause in the pace of upstream FPSO capex spending by the oil majors and national oil companies, which could impact BAB’s growth prospects. BAB’s longer-term growth plans may also require equity funding in the medium term, leading to a potential rights issue, in our view.

Posted by rohank71 > 2024-02-29 09:23 | Report Abuse

looks like the worst may be over with most analyst saying higher operating cashflow per quarters...vs highlighting the impairment. the impairment is neutral

Posted by Mkt888888 > 2024-02-29 09:30 | Report Abuse

https://rfs.cgsi.com/api/download?file=cd367732-567e-4325-9523-5af03a323e3a&rpt=e51fa19a-b433-4d83-a672-46cef76c7d20

Posted by ITreeinvestor > 2024-02-29 09:32 | Report Abuse

CIMB raise target price to RM0.75
Selldown offers opportunity to accumulate

Posted by ITreeinvestor > 2024-02-29 09:33 | Report Abuse

4Q23 core net profit of RM313m

Posted by ITreeinvestor > 2024-02-29 09:35 | Report Abuse

Trading in BAB shares is likely to be dominated by retail flows, in our view,
and the average retail investor may find it difficult to understand the rationale for such an impairment; this caused BAB’s shares to plunge 11% yesterday after the lunchtime release of its FY23 results.

In our view, this is an opportunity for investors to accumulate BAB shares for a potential short-term rebound.

Posted by ITreeinvestor > 2024-02-29 09:38 | Report Abuse

BAB emphasised at the post-results analyst briefing that the contracted cashflows
for the FPSO Kraken remain unchanged.

Posted by ITreeinvestor > 2024-02-29 09:43 | Report Abuse

Separately, BAB said at the analyst briefing that it already received credit
committee approvals from several banks to refinance the RM1.5bn sukuk
borrowings which will be maturing on 4 Sep 2024F.

Posted by nikicheong > 2024-02-29 10:09 | Report Abuse

Anyone have the research report from UOB Bank? Appreciate if you could share.

Posted by nikicheong > 2024-02-29 10:09 | Report Abuse

Maybank: https://mkefactsettd.maybank-ke.com/PDFS/367879.pdf

Posted by Penarak > 2024-02-29 10:15 | Report Abuse

Everywhere say good but share price not good !

Posted by Robert Waters > 2024-02-29 10:23 | Report Abuse

Thank you for the CIMB Raymond Yapp update, Mkt. I respect Raymond. He won the award for the best Oil and Gas Analyst. His endorsment means a lot.
Greedy Gary, on the other hand, has no credibility with me. He is a manipulator. If he impairs, I suspect he does it for a personal benefit, rather than to actually reflects true value of the asset. In any case, he succeded in creating turmoil again.
The good part is that stock will go up when he finally is kicked out.

Posted by nikicheong > 2024-02-29 10:40 | Report Abuse

Raymond's reporting is always the most detailed. The others like Maybank / Public Bank just write surface-level stuff to cari makan.

Posted by marlboroman2 > 2024-02-29 10:40 | Report Abuse

nice rebound, hopefully fade back most of yesterday's knee-jerk reaction

Posted by rohank71 > 2024-02-29 10:44 | Report Abuse

worst may be over... couldn't load up at 50... Happy with what I have. back to 60 soon.

Posted by nikicheong > 2024-02-29 10:47 | Report Abuse

Now, share price-wise, we are back where we were 2 weeks ago.

Posted by rohank71 > 2024-02-29 10:50 | Report Abuse

soon once all the confusion is over... it will be back above 60. this who have sold yesterday should accumulate now.

Posted by rohank71 > 2024-02-29 10:50 | Report Abuse

cashflow is most important not P&L

Posted by rohank71 > 2024-02-29 11:12 | Report Abuse

if not for the impairment..BA would be now above 63.

Posted by sammmy > 2024-02-29 11:33 | Report Abuse

After sell down yesterday, the share price much more easy to push up now. Those who collected at 0.515-0.530 , easily 10% profit in near future

Posted by zonefinder > 2024-02-29 11:39 | Report Abuse

Look at it another way, Rohank, the impairment is giving another chance for long termers to load up at better prices..

Posted by zonefinder > 2024-02-29 11:41 | Report Abuse

Gabriel, thanks for the comprehensive explanation...Glad to see more robust and substantive discussions here instead of the shitty pot shots ...cheers!