Friday 29 Mar 2024
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KUALA LUMPUR (May 27): Bumi Armada Bhd emerged as the most actively traded counter this afternoon after the debt-laden company announced a 29% jump in its first quarter net profit on absence of impairments.

At 2.35pm, the stock saw 88.31 million of its shares exchanging hands, accounting for nearly 10% of the total turnover of 899 million shares in the broader market.

Its shares were traded one sen or 5.41% higher at 19.5 sen, valuing Bumi Armada at RM1.15 billion. The counter was suspended for an hour from 9am this morning ahead of the release of the group's quarterly earnings report.

For the first quarter ended March 31, 2019 (1QFY19), Bumi Armada said net its profit rose 28.5% year-on-year to RM62.21 million, from RM48.42 million, although revenue fell 18.1% to RM491.61 million, from RM600.34 million in 1QFY18.

This was mostly due to higher allowance for impairment losses of receivables as well as lower depreciation as a result of impairment losses recognised on the Armada Kraken floating, production, storage and offloading (FPSO) and certain offshore support vessels (OSV) booked in the corresponding quarter last year.

However, for the subsequent quarters, AmInvestment Bank research analyst Alex Goh guided that Bumi Armarda could register softer earnings, given that the group's interest rate has risen by 2 percentage points on a US$660 million (RM2.7 billion) refinanced term loan since May 23.

Goh also pointed out that the likelihood of a dilution from an equity-raising exercise remains elevated, given Bumi Armada's relatively high net debt to earnings before interest, taxes, depreciation, and amortisation (Ebitda) of 9.1 times, as compared to that of Yinson Holdings Bhd at 2.9 times.

"For the group's joint venture with Shapoorji Pallonji Oil & Gas (Shapoorji) to provide an FPSO vessel to Oil and Natural Gas Corporation Ltd (ONGC) for the ONGC NELP Block KG-DWN 98/2 Development Project Cluster-II field off Kakinada, India, we estimate that a capex of US$1.3 billion, 30% equity stake and debt-to-equity financing ratio of 80:20 will mean that the group will need to raise additional equity financing of RM327 million.

"This appears uncertain given that Bumi Armada has just recently refinanced unsecured term loan and revolving credit facilities.

"The group intends to dispose of idle offshore marine services (OMS) assets while a 40% sale in the fully operational US$1.5 billion Olombendo FPSO could secure US$275 million (RM1.1 billion) cash, assuming a project internal rate of return of 11%.

"However, it will only cut Bumi's net debt/Ebitda to 7.9 times, which remains elevated against its peers. As such, the stock trades at a depressed FY19F price-earnings of 5x currently," he wrote.

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