Bumi Armada IPO Share Price Target Fair Value

2010, 2011, 2012, 2013 Based on Bumi Armada IPO price of RM3.15
Bumi Armada EPS RM0.16, RM0.159, RM0.185, RM0.183
Growth negative 0.7% (2011), 16.1% (2012), negative 0.9% (2013)
Bumi Armada Gearing Net 0.53
Bumi Armada Dividend Yield minimal
Source: TA with Bumi Armada fair value at RM3.29

TA Securities
We acknowledge the fact that Bumi Armada has a strong business model backed by its diversification in vessel types. Nevertheless we are advising investors NOT TO SUBSCRIBE to the IPO due primarily to valuations and a high debt level.

We benchmark Bumi Armada against its global peers namely Modec, BW Offshore and SBM Offshore. We use a FY12 target PER of 17.8x, a 20% premium to its peer average which brings us to a target price of RM3.29. We believe the premium is justified as Bumi Aramada has managed a much higher
EBITDA margin than its closest peer, BW Offshore. Furthermore local vessel players such as Perisai, Petra Perdana, Tanjung Offshore and Alam Maritim only trade between an FY12E PER of 5.9x and 9.6x. At the indicative IPO price of RM3.15, the issuance can be regarded as fleecing investors as there is not much upside.

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2010, 2011, 2012, 2013 based on Bumi Armada share price of RM3.15
Bumi Armada EPS RM0.12, RM0.15, RM0.19, RM0.22
Bumi Armad PE ratio 26x, 21x, 16.6x, 14.3x
Growth 26% (2011), 21% (2012), 16% (2013)
Net gearing 0.5x
dividend n/a
Forecast by HwangDBS

HwangDBS
Fair value is RM4.05, based on 22x FY12 EPS, which is the average FY12 PE multiple for big-cap O&G stocks in Malaysia. We believe that the valuation is justified given that Bumi Armada is Malaysia's leading OSV player and sole FPSO player, and has an impressive track record with superior margins. Our projected 3-year earnings CAGR of 23% include potential contributions from FPSO projects in
India and Australia as well as from Acergy Hawk under its T&I business.

Re-rating catalyst for the industry. Bumi Armada's listing is set to be the biggest IPO this year, raising RM2.8bn in the capital market. At RM9.2bn market cap (based on RM3.15 offer price), Bumi Armada will be the second biggest O&G stock in Malaysia after MMHE (RM13.6bn market cap).

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Please note that Bumi Armada IPO price of RM 3.15 is not the final price. It will be RM3.15, or the Institutional Price after bookbuilding, whichever is lower, subject to a refund of the difference between the Final Retail Price and RM3.15 per Share.