AllianceDBS maintains 'buy' for Bumi Armada

Stock Name: ARMADA
Company Name: BUMI ARMADA BERHAD

Research House: ALLIANCE

Price Call: BUY

Target Price: 2.65

KUALA LUMPUR: AllianceDBS Research has maintained its 'buy' call on Bumi Armada Bhd due to the company's bright prospects and a strong RM32 billion orderbook.

The research house also raised the global floating production, storage and offloading (FPSO) player's target price to RM5.15 from RM4.50 previously.

"While we lower 2014 and 2015 financial years earnings estimates by 5.0 per cent and 9.0 per cent, respectively, to reflect slower offshore support vessel (OSV) and transport and installation (T&I) businesses, we still expect a strong pick-up in earnings in subsequent quarters.

"This will be driven by the Kraken FPSO, new contribution from the Angola FPSO and seasonal pick up T&I and OSV in Malaysia and in the Caspian Sea," the

research firm said in a note today.

Meanwhile, Bumi Armada proposed a bonus and rights issue last week, which would raise an estimated gross proceeds of RM2.25 billion.

Of the total, RM1.76 billion would be used for capital expenditure and the balance for working capital and expenses for the proposals, the company said.

"Of the RM1.76 billion capital expenditure, 80 per cent will be used to fund a new FPSO project and the remainder for new OSV and T&I assets.

"We view that the rights issue is attractive for investors. As such, we recommend investors to subscribe their rights entitlement.

"Based on our indicative ex-all target price of RM2.65, upside is still significant at 15 per cent," the research house added.-- Bernama