Bumi Armada gains 4.8% as CIMB Research maintains 'add' rating

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KUALA LUMPUR (Dec 8): Bumi Armada Bhd’s counter gained as much as 4.8% or 5 sen today after CIMB Research maintained its “add” rating on the counter for its long-term fundamentals and firm order book of RM21.8 billion.

As at 4.11pm, Bumi Armada settled at RM1.07, up 3 sen or 2.88% with 26.88 million shares changing hands, giving it a market capitalisation of RM6.28 billion.

On Friday, the company told Bursa Malaysia that its CEO and executive director Hassan Assad Basma would relinquished his positions with effect from Jan 1 next year.

It said Hassan had requested for an early release of his contract of employment due to family reasons.

Prior to that, Hassan had sold the remainder of his equity stake amounting to 2.74 million shares in the company on Dec 4 via two separate transactions at RM1.02 and RM1.03 apiece. He sold the shares due to margin calls.

Pending the appointment of a new CEO, Chan Chee Beng, a member of the board since 2003, has been re-designated as executive director and acting CEO.

He has been a member of the executive committee since 2008, acting as its chairman since last year.

“Under his [Hassan’s] leadership, Bumi Armada has climbed a notch to No. 5 in the world’s FPSO league table over the past three years. While his resignation as CEO is a negative development, we take comfort in the company’s long-term fundamentals, supported by a firm order backlog of RM21.8 billion,” said CIMB Research in a note to clients today.

“We continue to value the stock at 21.2 times calendar year 2016 (CY16) price to earnings ratio (P/E), still at a 30% premium over our target market P/E of 16.3 times pending a review of our premium valuations. Maintain ‘Add’ with a strong FPSO contract pipeline as potential re-rating catalyst,” it added.

It told its clients to take advantage of the share price correction and accumulate shares in the company.

It was also upbeat on Bumi Armada’s fundamentals despite the current oil price weakness, “anchored by its firm order book of RM21.8 billion, excluding the 10-year US$1.18bn Madura contract and extension options worth RM11.8 billion”.

“The company is currently bidding for four FPSO projects - one each in Ghana, Nigeria, Namibia and Angola,” it added.