Bumi Armada falls on contract signing delay, valuation normalisation

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KUALA LUMPUR (Dec 5): Bumi Armada Bhd fell after the company announced it was postponing, yet again, the contract signing for a US$1.18 billion (RM3.76 billion) floating production, storage and offloading (FPSO) vessel charter.

Oil and gas (O&G) support services provider Bumi Armada was supposed to have signed the charter contract with Husky-CNOOC Madura Ltd.

Yesterday, Bumi Armada said both companies had agreed to extend the duration for the contract signing until December 10, 2014.

Today, Bumi Armada shares fell one sen or 1% to RM1.03 at 10.55am. At 11.13am, the stock saw some eight million shares transacted.

For comparison, the FBM KLCI declined 2.29 or 0.13 points,

From a broader viewpoint, analysts said Bumi Armada's share price also hinged on factors including lower crude oil prices which had led to a downgrade of the stock.

In a note today, MIDF Research said it lowered its target price for Bumi Armada shares to RM1.69 from RM2.06 previously. MIDF, however, maintained its "Buy" call for the stock.

MIDF said Bumi Armada’s year-to-date share price decline of 57.8% could signify the end of steep valuation premiums given to large-cap O&G stocks.

“We believe that the share price weakness could also reflect a normalisation or rationalisation of its hitherto lofty valuation down towards the levels of its global peers.

“Bumi Armada has been trading at a large premium in excess of 20 times price-earnings ratio. As such, we could now be experiencing a period of normalisation of valuations,” MIDF said