Bumi Armada remains top sector pick

PETALING JAYA: RHB Research is keeping Bumi Armada Bhd as its top sector pick given its recent results, which outperformed expectations.

The offshore energy services provider recently said first quarter 2022 core profit surged 21% year-on-year on lower depreciation and finance costs to Rm178mil, which was 29% and 30% of the research house’s and consensus full-year estimates.

“Apart from bidding for new floating production storage and offloading (FPSO) projects, it is also exploring new opportunities such as floating liquefied natural gas and carbon capture projects in the longer run.

“Bumi Armada remains our sector top pick for its undemanding valuation and strengthening balance sheet, led by stable FPSO operations and continuous asset monetisation,” said RHB Research in its latest report.

The broker increased its financial year 2022 (FY22)-FY24 earnings estimates by 3% to 4% after lowering finance and depreciation charges.

It maintained its “buy” call but lowered its target price to 58 sen from 64 sen after rolling forward its valuation base year to FY23.

Meanwhile, MIDF Research, which reiterated its “buy” recommendation and target price of 72 sen, is optimistic over the performance of the group’s FPSO segment and potential securement of new contracts on the back of increasing oil and gas prices in the near-term.

“The global FPSO market size is expected to rise from Us$7bil to Us$17bil (Rm31bil to Rm75bil) by 2027, in tandem with the high oil prices enticing upstream and midstream activities, the rising number of offshore reserves discovery, and the increasing demand for hydrocarbons worldwide, all which would benefit the group’s operations in the next coming quarters.

“We reiterate our positive stance on Bumi Armada, based on its robust orderbook and balance sheet, as well as its large network of operations,” it said.