PETALING JAYA: Analysts have lowered their full-year earning forecasts for Bumi Armada Bhd this year (FY25) as they anticipate earnings for the upcoming quarters to continue to be soft.
This was following Bumi Armada’s weaker-than-expected earnings in the first quarter ended March 31, (1Q25).
The offshore energy facilities and services provider 1Q25 core profit was down 16% quarter-on-quarter (q-o-q) and 27% year-on-year (y-o-y) to RM182mil after stripping off RM0.4mil in unrealised foreign exchange gains.
The q-o-q performance was dragged by the recognition of compensation payable to the charterer of the Armada Kraken floating production, storage, and offloading (FPSO) vessel.
This followed confirmation of the second annual option charter extension to April 1, 2027 and the absence of maintenance revenue work for the Armada Olombendo vessel.
“Post 1Q25 results, we cut our FY25 to FY27 earnings estimate by 14%, 12% and 13%, respectively, after lowering assumptions on Kraken contributions.
“That said, the stock is still trading at a fairly attractive 5.4 times FY26 price-to-earnings ratio,” RHB Research said in a report. It noted that Kraken started its first extension option in April 2025 and the second annual option has been confirmed.
Meanwhile, the group repaid US$32mil in borrowings in 1Q25, so its net gearing further improved to multi-year low of 0.34 times compared with 4Q24’s 0.37 times.
As such, it said management may consider acquiring new or existing FPSO projects.
A development that will be closely watched is Bumi Armada’s potential merger with MISC Bhd’s offshore businesses, which RHB Research said could improve the former’s financing access and tender win rate.
However, it contends that the structure and pricing of the deal would be crucial determining factors.
Meanwhile, CIMB Research said a merger with MISC’s offshore businesses is a potential re-rating catalyst for the stock, which is down by almost one-quarter since the start of the year to 50 sen.
“We reiterate ‘add’ on Bumi Armada as we see it as a cheap way to buy into the merged entity,” it said.
According to CIMB Research, while the group’s management refrained from commenting on the proposed deal during the results briefing, it shared that the due diligence process is ongoing.
“We suspect that Bumi Armada and MISC may only be able to make a decision on whether to proceed with the transaction in 4Q25 as the mutual due diligence and valuation process is complicated and multi-faceted, in our view.”
Bumi Armada is also planning to grow several new ventures such as the carbon capture business in Britain and developing several upstream ventures in Indonesia.
“These may be long-term growth catalysts for Bumi Armada, but we expect the group to approach these ventures with a light touch until it can reach a decision on the merger with MISC’s offshore businesses,” said CIMB Reserarch, which has a more bullish price target at 85 sen for the company compared with other research houses.
