Affin Hwang maintains Buy on Bumi Armada, raises TP to 34 sen

KUALA LUMPUR: Affin Hwang Capital research reiterated its buy call on BUMI ARMADA BHD with a higher target price of 34 sen on the disposal of FPSO Perdana to Century Energy Services.

The research house looks favourably on the sale of the vessel for US$40mil as it has not been generating revenue since 2017.

“We view this disposal positively as impact would be earnings accretive from depreciation and maintenance cost savings. “More importantly, this will also free up initial investment used to fund the equity portion of its new ONGC’s FPSO project,” it said.

While it remains unclear how much of the proceeds of the sale will be used to pare down the group’s debt, Affin Hwang estimates Bumi Armada’s net fearing to fall from 2.65x as at end 2Q19 to 2.6x.

According to the payment terms, Bumi Armada will receive US$5.5mil by end-2019 and is expected to receive another US$5mil within six months of delivery of the FPSO or the field’s first oil, where the veseel will be redeployed.

US$11.6mil will be used to settle the amount owed to Century Energy while the remaining US$17.9mil will be paid within two years from the first oil date.

Source: TheStar