Photo shows a Bumi Armada vessel. Analysts have trimmed Bumi Armada’s earnings due to the bearish outlook for crude oil price and mounting concerns over declining offshore capital expenditure.
KUCHING: Analysts have trimmed Bumi Armada Bhd’s (Bumi Armada) earnings due to the bearish outlook for crude oil price and mounting concerns over declining offshore capital expenditure.
According to AllianceDBS Research Sdn Bhd (AllianceDBS Research), even after including RM15 million per annum joint venture (JV) contribution from the Madura project starting financial year 2015 (FY15), earnings were still reduced by 12 per cent for FY15F and eight per cent for FY16F.
The research house said that in FY15, Bumi Armada will replace seven vessels with four new multi-purpose vessels (MPSV) and three ice class vessels.
It added that the latter has secured long term charters, but the MPSV may see slow demand.
“In the transport and installation (T&I) division, we see further risks for Armada Hawk, Condor and KP1 vessels and now assume 50 per cent utilisation instead of 70 per cent.
“We also reflected higher interest costs arising from additional borrowings for the Madura conversion,” it said.
AllianceDBS Research expects new FPSO tendering activity to be unexciting as long as crude oil price remains suppressed.
It noted that Pemex has pushed back two projects, and possibly more while Bumi Armada still has three firm bids in Africa but that could drag on into FY16.
“That said, the group has three major conversions on their plate to keep them busy in the interim. FY15-16 earnings growth will be driven by conversion progress for the Kraken, Angola 15/06, and to a smaller extent, Madura FPSO,” the research house said.
All in, AllianceDBS Research maintained a ‘buy’ recommendation as the stock is oversold.
It concluded that Bumi Armada’s earnings outlook is underpinned by the RM35 billion outstanding orderbook with nine firm FPSO contracts.