|The Edge FD Top Pick 2017|
Bumi Armada Bhd, which saw its share price fall more than 40%, may provide another opportunity for investors in anticipation of improving sentiment and operating outlook of the oil and gas sector.
TA Investment Management Bhd executive director Choo Swee Kee pointed out that Bumi Armada shares were oversold in the past two years and expected there would be strong earnings growth for its floating production storage and offloading (FPSO) business.
“Bumi Armada is one of our top picks for 2017. Moving forward, we think there will be stronger earnings growth for the FPSO. We also like earnings generated from the FPSO as they are seen as more stable,” he told The Edge Financial Daily. Bumi Armada is one of the world’s largest FPSO players.
Public Investment Bank, which has a “buy” call on the counter, expects to see a boost in earnings from four major FPSO & floating gas solutions (FGS) contributions in 2017, according to its note dated Nov 24, 2016.
Bumi Armada posted a net loss of RM96.71 milion in the third quarter ended Sept 30, 2016 (3QFY16) versus a net profit of RM70 million a year earlier, on lower revenue. Revenue fell 33% to RM377.51 million in 3QFY16 from RM559.46 million in 3QFY15, as it saw lower income from FGS and FPSO operations.
Despite weaker earnings before interest, taxes, depreciation and amortisation (Ebitda) level, UOB Kay Hian said it had assessed that there was no cause for concern as Bumi Armada was still well within the allowable range for loan covenant on net debt/Ebitda. — By Yimie Yong