Bumi Armada well-positioned for gas jobs globally

Bumi Armada Bhd is seen to be in a good position to bid for floating liquefied natural gas (FLNG) jobs globally and this bodes well for its future growth.

This comes after the oil and gas services provider secured the approval from the American Bureau of Shipping for an innovative FLNG infrastructure solution that could bring LNG to the market in a fast, cost-effective, flexible, and reliable manner.

According to Kenanga Research, securing the approval would open doors for Bumi Armada to bid for more FLNG projects in the global market.
“We are positive on the latest development that will open doors for Bumi Armada to FLNG projects,” the brokerage wrote in a report yesterday.

“The group has developed the barge-based liquefaction unit for a standardised LNG design capacity based on a modularised and repeatable compact design. In other words, if executed without flaw, the solution would be cheaper for client as a floating-liquefaction solution would be more flexible compared to the current onshore solution,” the research house added.

Kenanga Research maintained its “outperform” call on Bumi Armada, with an unchanged sum-of-parts target price of 62 sen.

The brokerage said it liked Bumi Armada due to the sustained traction in the group’s efforts to deleverage its balance sheet, which has a current net gearing of 0.8 times; its long-term earnings visibility from its substantial order book in excess of RM20bil; and the position of the company as a leading contender for a US$1bil engineering, procurement, construction, and commissioning contract for floating production storage and offloading (FPSO) vessel Cameia.

Meanwhile, Kenanga Research noted the forced shutdown of FPSO Kraken would likely hit Bumi Armada’s earnings for the third quarter ended Sept 30, 2023. The asset, it said, had been running at full steam since August 2023 as its transformer had been successfully reconditioned and redundancy had been secured in September 2023 with a fourth new transformer installed on the FPSO.

“Our forecasts assume a partial loss of bareboat charter income from Kraken in June-August 2023. This resulted in a benign 9% impact from the shutdown,” Kenanga Research said.

It added that Bumi Armada’s securing a syndicated term-loan facility worth US$105.5mil, with final maturity on Sept 25, 2023, to refinance its existing facility (maturing in May 2024) would reduce concern on its current gearing level.
Source: The Star