KUALA LUMPUR: MIDF Research Sdn Bhd (MIDF Research) has put a value of RM3.62 for Bumi Armada Bhd (Bumi Armada), based on 20.4 times the price earning ratio (PER) for 2012, representing a potential upside of 19.3 per cent to the final initial public offering (IPO) price.
“Our targeted 20.4 times multiple is derived from earnings weighted price earning ratio of Bumi Armada’s four major business units,” MIDF Research said in its latest research note.
It valued the company’s floating production, storage and offloading and oilfield (FPSO) services business at 22.8 times PER, which was in line with the average domestic big-capitalisation oil and gas players.
“The valuation premium is justified by the company’s better mid-to-long term earnings growth prospects and superior margin,” MIDF Research said.
It valued Bumi Armada’s offshore supply vessels (OSV) segment at 14 times, higher than the sub-sector average of 10 times as Bumi Armada’s fleet size was the largest with a proven profit track record for the past two years when most domestic OSV players suffered losses.
It also imputed 21 times PER for Bumi Armada’s transportation and installation division which was in sync with the offer price to Sapura Crest in the recent announced merger deal.
According to MIDF Research, Bumi Armada, which would be relisted on the main board of Bursa Malaysia on July 21, has bright prospects with a strong order book of RM5.8 billion and a potential contract extension worth RM2.5 billion.
The company’s earnings visibility is expected to be sustained as its outstanding order book was equivalent to 4.6 times the revenue for financial year 2010.
On June 25, the company also secured a seven-year contract with a further six-year extension for its next FPSO project in India.
Factoring these new contracts, MIDF Research expected Bumi Armada’s earnings before interest and tax contribution from this segment is anticipated to grow by 40.3 per cent, year-on-year, in the next financial year.
The company is also tendering six FPSO projects worldwide, two of which are in Malaysia and four in Angola, Nigeria and Indonesia.
“The management is targeting to secure at least one new FPSO contract, annually, over the next few years.
“Bumi Armada is ambitious of becoming the world’s fourth largest FPSO player by fleet size by end-2013,” MIDF Research added. — Bernama