Bumi Armada targeting more jobs globally

KUALA LUMPUR: Bumi Armada Bhd (BAB) is eyeing a number of floating production, storage and offloading (FPSO) jobs globally and has been shortlisted for three tenders.

Analyst said the tender for the EnQuest's Kraken project in the North Sea, Afren's Okoro block off Nigeria and ENI's OML field of Nigeria are expected to be awarded this year.

It is learnt that BAB is currently in the design competition phase for all three projects with the winners to be announced in February, June and September.

"Hence, we believe that realistically, BAB stands a reasonable chance at winning at least one FPSO job this year," said MIDF Research.

Amresearch, meanwhile, remains positive on the group's longer-term prospects on the hopes that the group may secure up to three FPSO charters this year.

At the same time, it said BAB is also planning to move into more complex engineering develop-ments such as floating storage regassification and liquefied natural gas projects.

"We estimate that the group's order book (including optional extensions) rose 14 per cent quarter on quarter from RM10.5 billion to RM12 billion after finally securing the Cluster 7 FPSO contract from Oil and Natural Gas Corp Ltd (ONGC)," it said.

"This represents a healthy 4.6 times the revenue of the financial year ending December 31," it added.

AmRearch said it is maintaining its "buy" recommendation on the stock due to the likelihood of new FPSO vessel contracts as oil and gas developments reignite globally, tightening vessel utilisation rates and premium scarcity for oil and gas stocks with large market capitalisation.

"We maintain our 'buy' call on Bumi Armada, with a lower sum-of-parts-based fair value of RM4.30 per share (from RM4.60 per share earlier), which implies a financial year ending December 31 forecast price earnings of 25 times," it said.

MIDF Research noted that the offshore supply vessel (OSV) segment, which currently contributes around 33 per cent of the operating profit, will be a pivotal business driver for BAB.

"The group is expanding its fleet in terms of size and capabilities, which have allowed them to successfully win contracts internationally. They will be buying another vessel soon to complement its subsea umbilicals, risers and flowlines (SURF) segment," said MIDF, adding that the group is also awaiting four vessels from Nam Cheong.

For the medium term, it said BAB is exploring opportunities in the gas segment of the value chain.

"They are looking at vessel conversions for floating liquefied natural gas (FLNG)," it said.

MIDF Research, which is maintaining its neutral call, said BAB with a 12-month target price of RM3.56 per share, based on a forward price earnings ratio (PER) of 21 times and earnings per share of 16.9 sen.

JF Apex Securities Bhd likes BAB for its clear earnings visibility and modern fleet that positions itself strategically to benefit from the ongoing capital expenditure investment in the oil and gas industry.

"We assigned an industry average forward PER of 20.2 times to derive the stock target price. Based on financial year ending December 2014 EPS forecast of 16.9 sen, we are maintaining a hold on BAB with a target price of RM3.68," it said.