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Tuesday, September 20, 2016

PublicInvest Research retains Outperform for Bumi Armada

Monday, 19 September 2016 | MYT 9:13 AM
PublicInvest Research retains Outperform for Bumi Armada

KUALA LUMPUR: PublicInvest Research expects retainsBumi Armada to report weaker results on-year in 2016 as the group’s main earnings driver projects are at the tail-end stages of their conversion phase but 2017 will see a boost in its earnings.

It said on Monday the S-Curve progress billings would see a fall in contributions in the 2HFY16.

However, 2017 will see a boost in earnings from the four major floating production storage and offloading (FPSO) and floating gas solutions (FGS) contributions, hence the research house is maintaining its view that Bumi Armada will outperform but with an unchanged target price 90 sen.

Bumi Armada, had on behalf of its unit Armada Kraken Pte Ltd, confirmed that they have concluded discussions with EnQuest the charterers of Armada Kraken on the FPSO vessel’s USD20mil liquidated damages following the terms of the FPSO contract.

In recognition of some amendments, a further US$65m will also be paid to EnQuest during the course of the charter term.

“We are however comforted that the charter rates and terms of the FPSO contract remains intact. The Armada Kraken is still on track for its sail-away in 4QFY16, as agreed with new key dates with EnQuest, and is expected to begin operating in 1HFY17.

“We continue to recommend Bumi Armada with an Outperform and an unchanged TP of 90 sen derived by our DCF approach, as earnings growth catalyst from the four major FPSO & FGS contributions are expected in 2017 as all the projects’ first oil/gas estimated delivery or sail away are by end-2016.

“This claim from Armada Kraken has been accounted for in our estimates, and poses a minimal effect to our estimates by between 0.2%- 1.2% of revenue and 0.4% - 2.0% of core earnings,” it said.

Armada Kraken is a FPSO vessel bare boat charter, conversion, operation and maintenance contract for USD1.4bil for the Kraken Field, in the North Sea, UK.

The FPSO has a production capacity of 800,000 barrels of oil per day and storage capacity of 600,000 barrels. The duration for the contract is for eight years with 17 optional annual extensions.

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