Bumi Armada - Secures US$200mil LukOil T&I job BUY

Stock Name: ARMADA
Company Name: BUMI ARMADA BERHAD

Research House: AMMB

Price Call: BUY

Target Price: 5.05

- We maintain our BUY call on Bumi Armada, with an unchangedsum-of-parts-based fair value of RM5.05/share, which implies an FY12F PE of26x. 

- Bumi Armada has been awarded a US$200mil (RM614mil)contract by OAO Lukoil's subsidiary OOO Lukoil-Nizhnevolzhskneft to engineer,procure, install and pre-commission subsea in-field and inter-field pipelinesfor the Filanovsky field in the Russian sector of the Caspian Sea.

- LukOil is one of Russia's exploration and productiongroups. The scope of works, which involves 9 infield/inter-field linesmeasuring 90 kilometres, will be undertaken by Bumi Armada's derrick pipe-laybarge, the Armada Installer. This project is expected to be completed in over32 months with the majority of works to be carried out by end-2014.  

- Including the existing Petronas Carigali's contract inTurkmenistan, this contract will raise Bumi Armada's transport and installation(T&I) order book by 50% to RM1.8bil. We have assumed fresh T&I order book assumption of RM600mil thisyear. Hence, we maintain our FY12F-FY14F earnings for now, pending the award ofadditional projects. In our view, the Armada Installer looks almost fullyoccupied until 2014.

- Including renewable options of RM3.1bil to the group'sfirm orders, the group's total order book has risen by 6% to an estimatedRM10.5bil ' which represents 4.6x FY12F revenue. This is likely to increase asthe group is currently bidding for six FPSO contracts in Malaysia, Indonesia,India and West Africa. 

- Besides T&I jobs, the group is on the prowl to acquireadditional platform supply vessels and accommodation work boats given itstightening asset utilisation rates. This also supports our view that marinecharter operations for the industry is reaching an inflection point, which willlead to a significant increase in charter rates in 2H2012. 

- We continue to like the stock due to the followingre-rating catalysts:- (1)Rising likelihood of new floating production storageand offloading vessel contracts as oil & gas developments reigniteglobally, (2) tightening vessel utilisation rates, and (3) premium scarcity foroil & gas stocks with large market capitalisation.

- The stock currently trades at an attractive FY12F PE of23x compared with SapuraCrest Petroleum's peak of 29x in 2007.

Source: AmeSecurites