This article first appeared in The Edge Financial Daily, on March 16, 2016.

KUALA LUMPUR: AmResearch Sdn Bhd has maintained its “sell” rating on Bumi Armada Bhd and slashed its fair value to 69 sen — from 86 sen — based on a larger 55% discount to its revised sum-of parts of RM1.53.

In a note yesterday, the research house said its forecast FY16-FY17 earnings have been cut by 5%-7% due to lower offshore support vessel utilisation and margin assumptions.

On Monday, Bumi Armada announced that it had filed a suit in the Supreme Court of Western Australia against Woodside Energy Julimar Pty Ltd to claim for damages arising from the termination of its Armada Claire floating production storage and offloading (FPSO) contract.

The FPSO unit had been operating in the Balnaves Field, off north-western Australia, since August 2014. Bumi Armada had said the contract’s termination was expected to impact the full-year 2016 financial results of the group.

Yesterday, AmResearch said besides the loss of revenues from Armada Claire, it remained concerned that this may not be the final FPSO termination as the EnQuest-operated Kraken project may face financial viability concerns if low crude oil prices persist towards the end of the year.

“Consensus estimates a FY16F (forecast) loss of £56 million (RM329 million) for EnQuest, which has a market capitalisation of £120 million — 12% of Bumi Armada.

“The US$1 billion (RM4.13 billion) Kraken FPSO, currently 80% completed and expected to be delivered later this year, accounts for 21% of the group’s current firm order book,” it said.