• 2Q14 PATMI down 12.1% YoY
• Expecting a stronger 2H
• Firm order book of MYR21.7b

2Q14 results within expectations

Bumi Armada Berhad (BAB) reported 2Q14 results which came in within our expectations. Revenue rose 22.6% YoY to MYR590.1m, forming 23.6% of our FY14 forecast. However, PATMI fell 12.1% to MYR98.4m, largely due to a 3.9 ppt decline in its gross margin to 35.5% and higher operating and tax expenses, but partially offset by a 82.1% jump in its share of results of joint ventures to MYR18.7m. Bottomline constituted 21.1% of our full-year projection. For 1H14, revenue and PATMI declined by 39.2% and 55.6% to MYR1,059.0m and MYR163.2m, respectively, due to a weak 1Q14 showing. Nevertheless, we are expecting 2H14 to be significantly stronger than 1H14 due to continued contribution from its FPSO projects and recovery in its OSV segment.

Bumper order book size

BAB announced two positive developments with the signing of the Angola Block 15/06 FPSO project worth ~MYR9.6b from Eni Angola S.p.A. and the receipt of the Letter of Intent for the Madura FPSO project in Indonesia worth ~MYR3.76b. As at 30 Jun 2014, BAB’s firm contract period order book stood at a robust MYR21.7b, with extension options totalling another potential MYR11.6b.

Dropping coverage

Looking ahead, BAB highlighted that there are emerging signs of a slowdown in the capex of exploration and production (E&P) companies, as well as a softening in oil prices due to the downward pressures exerted by shale oil and gas. Notwithstanding these near-term headwinds, BAB remains sanguine on the long-term outlook of the offshore oil and gas services industry, and would seek to diversify its operations and expand its footprint in the regions which it has a presence in. Given a reallocation of resources, we are CEASING COVERAGE on BAB with immediate effect.

Source: OCBC Research - 21 Aug 2014