KUALA LUMPUR: Bumi Armada Bhd's earnings assumptions remain conservative, as reported by Public Investment Bank Bhd (PublicInvest), assuming charter contributions from the second quarter of the financial year 2024 (2QFY24) onwards.
The company achieved the first oil for its 30 per cent-owned Armada Sterling floating production, storage and offloading (FPSO) on Jan 7, slightly later than guided by the investment bank.
Bumi Armada initially projected achieving first oil by November 2023, however, the actual date was later than anticipated.
"Despite this, our earnings assumptions remain conservative, with no contribution from FPSO Sterling 5 in 4QFY23 and 1QFY24. In our financial year 2024 (FY24) projections, we have assumed a contribution of 4.5 per cent from Armada Sterling 5 to the total earnings base," it said.
PublicInvest expects both Bumi Armada and its project partner will secure final acceptance from the client by the end of 1QFY24, while the first oil for Bumi Armada's Armada Sterling 5 FPSO was achieved later than initially guided.
However, Bumi Armada has not provided a specific date for the asset's final acceptance at this point.
PublicInvest maintained a "Market Perform" call on Bumi Armada, with its sum-of-parts target price of 58 sen.
The firm expressed a favorable view towards Bumi Armada, citing three key factors - a more favourable net gearing position of 0.7x in FY22 compared to 1.5x in FY21.
This includes long-term earnings visibility from a substantial order book exceeding RM20 billion, inclusive of potential extensions, and the potential for sustained long-term growth driven by various FPSO and liquefied natural gas opportunities.
However, it said post-Kraken recovery, the group's earnings will be flattish in the absence of any new projects.
PublicInvest said risks to its call include further delays in Sterling 5 JV first oil (beyond FY24), cost overruns and delays for engineering, procurement, construction, and commissioning (EPCC) projects, and FPSO contract extensions are not exercised for core FPSO assets.
