Hot Stock Bumi Armada rises 4% on Kraken oilfield news

by **Cals** Mon 18 Nov 2013, 15:50

Hot Stock Bumi Armada rises 4% on Kraken oilfield news

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Monday, 18 November 2013 12:52

KUALA LUMPUR (Nov 18): Bumi Armada Bhd's share price rose by as much as 4% after the company announced it has received the letter of intent (LOI) from EnQuest.

The LOI confirmed EnQuest’s intention to award the contract for the supply and operations of an FPSO for Kraken oilfield in the North Sea.

At midday break, Armada was trading at RM3.94 after rising 15 sen or 4%. The tenth top gainer saw some 375,000 shares exchange hands.

In a note, HwangDBS Vickers Research said it has upgraded its recommendation for Armada to ‘buy’, with a higher TP of RM4.50.

The research house has also raised its earnings forecast for Armada by 24% and 34% for FY13 and FY15 respectively to account for the contribution from the Kraken FPSO in FY14.

It foresees another large FPSO in FY15 based on Armada’s strong execution track record in the FPSO business.

“Armada has 11 outstanding FPSO tenders at the moment after the conclusion of the Kraken FPSO,” said HwangDBS. “Given its impressive track record in the FPSO business, we believe that Armada is a strong contender for the FPSO bids.”

“We believe that its strong growth momentum will continue to be sustained by the potential pipeline projects and its strong order book of RM8 billion, excluding the Kraken project which could be worth RM16 billion.”

Meanwhile, MIDF Research said it is maintaining its ‘buy’ recommendation for Armada with a target price (TP) of RM4.83, derived from forward FY14 price earnings ratio (PER) of 21 times and FY14 earnings per share of 23 sen.

“We like the stock based on its expanding topline and increasing orderbook quality value with sizable extension options,” said MIDF research analyst Aaron Tan Wei Min.

“We also like the stock for its sustainable margins of more than 20% and undemanding valuation.”

He noted Armada trades at a forward PER of 16.5 times, which is below its average PER of 26 times since listing in 2011.

Additionally, Tan pointed out the company is still a strong contender for the Madura FPSO job by Husky Energy worth around US$400 million (RM1.279 billion).