Friday 29 Mar 2024
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KUALA LUMPUR (Nov 7): Bumi Armada Bhd maintained its guidance that it is not in default risk because the oil and gas services provider is working with lenders and there are no deadlines in the current renegotiation of extending the refinancing of short-term loans. 

UOB Kay Hian Securities (M) Sdn Bhd analyst Kong Ho Meng, quoting Bumi Armada's management, wrote in a note today Bumi Armada is not considering an equity fund raising, and it will not secure any projects in the near term until it resolves its balance sheet. 

"Bumi Armada, when contacted by the media, said it has postponed the US$500m debt restructuring deadline to 1H19. Bumi Armada has no intention to go for a rights issue as it is pursuing other options — refinance, EMTN (Euro medium-term note) or trust (infrastructure funds) — to raise funds. A rights issue at the current price would not raise much money and would further erode share price. The new update is that negotiation for the refinancing is extended until 1H19," Kong said.

He said UOB Kay Hian maintained its buy call for Bumi Armada shares with a target price of 66 sen. At Bursa Malaysia today, Bumi Armada shares rose 0.5 sen or 1.28% at 12:30pm to settle at 39.5 sen.

Kong said: "We took into account that the group is still profit-generating and unlikely to report losses. Current risk-reward appears palatable but stock sentiment will continue to be weak on balance-sheet concerns and earnings confidence issue. Hence, although there is attractive upside from current price levels, we advise a wait-and-see towards the 2019 horizon once the company resolves its balance-sheet issues and monetisation plans, and ensures earnings sustainability in at least the next few quarters." 

The Edge Financial Daily reported today Bumi Armada missed its proposed October deadline to restructure some US$500 million (RM2.09 billion) worth of unsecured short-term loans due in three tranches by May 2019. It was reported that this raises concerns that the debt-laden group might be facing challenges to seek new loans.

"When contacted, an executive of Bumi Armada told The Edge Financial Daily that the group had postponed the debt restructuring deadline to first half of next year," The Edge Financial Daily reported.

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