Buy Bumi Armada shares, says HwangDBS

Bumi Armada is set to win big contracts from Petronas, especially floating production, storage, off-loading jobs
(FPSO)and marginal field projects, which could re-rate the stock, HwangDBS Vickers Research said today.

The research house maintained a "Buy" for Bumi Armada at RM5 target
price as it expected the company to secure the lucrative risk service
contracts (RSCs) for Petronas' marginal fields this year.

"It is
also premised on long-term earnings visibility of RM7.2 billion firm
order book (excluding a joint-venture FPSO project in India worth RM1.9
billion) and strong three-year earnings compounded annual growth rate of
26 per cent.

"Its excellent track record and synergistic oil
and gas services, especially FPSO solutions, may appeal to foreign oil
companies seeking to rope in a local partner for RSCs.

"We
understand Bumi Armada is keen to bid for marginal fields and its new
oil field services division sends a strong signal that it is leveraging
on its expertise to aggressively bid for RSCs, which are believed to
command 11-20 per
cent Internal Rate of Return." it said in a statement.

The research firm said FPSO tenders were picking up and Bumi Armada
would bid for more FPSO contracts in Malaysia as more jobs take off.

It said the FPSO tender process for Petronas' RM15 billion North Malay
Basin development had started, with the contract slated to be awarded by
year-end to meet production by 2013.
Petronas is also likely to apply FPSO solutions to its "Bunga Dahlia" and "Teratai" fields, it said.

Meanwhile, the FPSO tender for the "ONGC Cluster 7" marginal fields in
India has started and Bumi Armada is likely to bid for it, it added.

As at midday, Bumi Armada shares gained two sen to RM4.09. -- Bernama