KUALA LUMPUR: Bumi Armada Bhd's recurring earnings could improve by 6.0 per cent to 8.0 per cent for the financial year ending December 31, 2022 (FY22) and 2023 (FY23), mainly attributable to the absence of losses from the disposal of three ice-class vessels to PJSC Lukoil, a Russian oil and gas integrated company for US$44.5 million (RM186.6 million).
RHB Investment Bank Bhd (RHB Research) analyst Sean Lim said the disposal is expected to be completed by the first quarter (Q1) of 2022, and the proceeds raised would pare the company's debt.
He also expects Bumi Armada's balance sheet to improve on the back of healthy operating cash flow, led by stable floating production storage and offloading (FPSO) operations and continuous asset monetisation.
"Nonetheless, Bumi Armada is expected to record an RM25 million loss of disposal.
"The bulk of the proceeds (US$38 million) will be used to reduce its corporate debt, while the remaining US$6.5 million will be kept for the working capital purpose," he said in a research note today.
RHB Research has given a positive stance on the disposal as the monetisation of non-core assets would strengthen Bumi Armada balance sheet.
Post disposal, RHB Research said Bumi Armada's offshore marine services segment is now left with three offshore support vessels (OSV), two sub-sea construction vessels, and one JV sub-sea construction vessel.
RHB Research has retained a Buy call for Bumi Armada with a target price of 62 sen without incorporating the offshore marine services assets into its valuation.
Key downside risks include contract cancellations, weaker OSV utilisation rates, and a deterioration in Armada Kraken's operation.
