Bumi Armada slides to record low

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KUALA LUMPUR (Oct 15): The share price of Asia’s leading offshore support vessel provider Bumi Armada Bhd has fallen to a historical low of RM1.43 at the close of the morning trading session today, representing a decline of 10 sen or 6.54%.

Some 8.73 million shares changed hands in the session. The counter has dropped 42% since the start of the year.

Yesterday, Bumi Armada in a filing with Bursa Malaysia said that Bumi Armada and Husky-CNOOC Madura Limited (HCML) have agreed to an amendment in a letter of intent (LOI) issued by HCML on October 9, 2014.

The filing said, “Bumi Armada wishes to announce that HCML and the consortium have mutually agreed via an Amendment of Letter of Intent dated Oct 9 to extend the period for the execution of the Contract."

Accordingly, the LOI shall terminate upon signing of the contract, or on Oct 31 if parties involved do not seek further extension.

However, analysts who track the stock shrugged off the announcement.

Analyst from Alliance DBS Research, Arhnue Tan said in a research note today that the research house was ‘neutral’ on the news as Bumi Armada had previously secured extensions for the Kraken contract and 15/06 Angola project.

“But even in the worst case scenario – the contract is cancelled- that would only shave 11 sen off our target price. This still leaves significant upside from the current level after the recent selldown of Bumi Armada shares,” she said.

To recap, HCML had earlier issued a LOI to a consortium, which comprises Bumi Armada’s wholly-owned subsidiary, Bumi Armada Offshore Holdings Ltd, and its joint venture company PT Armada Gema Nusantara to supply one floating, production, storage and offloading vessel (FPSO) to HCML.

The contract has a value of US$1.18 billion (RM3.76 billion) for a fixed period of ten years with options of five annual extensions worth an aggregate value of US$147 million (RM469 million), if the options are fully exercised.