KUALA LUMPUR (March 15): 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 today, the research house said its FY16F-FY17F earnings have been cut by 5- 7% due to lower offshore support vessel utilisation and margin assumptions.
Bumi Armada has filed a Writ of Summons in the Supreme Court of Western Australia to claim for damages arising from the termination of its Armada Claire floating production storage and offloading (FPSO) contract.
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 loss of £56 million for EnQuest, which has a market capitalisation of £120 million - 12% of Bumi Armada.
“The US$1 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.