Bumi Armada Berhad - Dividend Surprise
Mon, 03-Mar-2025 08:51 am
by Ong Tze Hern • Apex Research

Counter

ARMADA (5210)

Target Price (RM)

0.760

Recommendation

Buy

Summary

  • ARMADA’s 4QFY24 results came in within expectations. Quarterly CNP stood at RM212.8m (-17.0% qoq, -32.8% yoy), bringing the FY24 CNP to RM979.6m (+29.8% yoy). 

  • The Group declared an interim dividend of 1.0sen, the first since FY15.

  • With a much healthier balance sheet and the potential share-based merger between ARMADA and MISC, we believe this could allow ARMADA to have a better access to financing for new FPSO projects.

  • No change to our earnings forecasts.

  • Maintain BUY recommendation with an unchanged target price of RM0.76 pegged to 0.6x FY25 BVPS (3Y historical mean). 

 

Within Expectations. ARMADA’s FY24 core net profit (CNP) of RM979.6m was in line with expectations, achieving 98% of our forecast and 105% of consensus full-year estimates.

 

Dividend Surprise. The Group declared an interim dividend of 1.0sen, the first since FY15.

 

QoQ. Excluding exceptional items, such as impairment loss at Kraken FPSO (RM325.1m), forex gains (RM23.6m), and other adjustments, 4QFY24 CNP dropped 17.0% qoq to RM212.8m, driven by weakening of USD against MYR, lower charter rate following the extension of Armada TGT1 FPSO’s charter period in 4QFY24 and Armada Kraken FPSO’s planned shutdown recognised in 4QFY24. Share of results from JVs and associates recorded a loss of RM17.0m, compared with a profit of RM15.0m in 3QFY24, due to a one-off reduction in finance lease revenue in 4QFY24 to align the lease term with the charter period for Armada Sterling III FPSO.

 

YoY. 4QFY24 CNP plunged 32.8% yoy due to reasons mentioned above.

 

YTD. For the full year, FY24 CNP surged 29.8% yoy to RM979.6m on the back higher Olombendo FPSO daily operating fee and lower revenue in FY23 as Kraken FPSO experienced hydraulic submersible pump (HSP) failure in late 2QFY23 and only resumed 100% production in Aug 2023.

 

Outlook. With a much healthier balance sheet and the potential share-based merger between ARMADA and MISC, we believe this could allow ARMADA to have a better access to financing for new FPSO projects, which ARMADA has struggled to secure in the past few years. Sterling II’s firm period contract will expire in Mar 2025 but management is confident of securing an extension or a new contract for the vessel. Furthermore, headline profit numbers should improve in FY25 compared with FY24 as no further impairment of Kraken FPSO is expected moving forward.

 

Earnings Revision. No change to our earnings forecasts.

 

Valuation and Recommendation. Maintain BUY recommendation with an unchanged target price of RM0.76 pegged to 0.6x FY25 BVPS (3Y historical mean). We remain positive on ARMADA, given its significantly improved balance sheet, which positions it well to secure new FPSO projects in a tight market.

 

Risk. Unable to secure contract extensions, contracts cancelled by clients, weaker-than-expected uptime from unexpected asset breakdowns.

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