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Oct 03, 2023

Bumi Armada Shares Fall After Production Suspension

By Ying Xian Wong Bumi Armada shares fell early Tuesday, as analysts downgraded

By Ying Xian Wong

Bumi Armada shares fell early Tuesday, as analysts downgraded the stock after the suspension of production at an offshore facility in the North Sea.

Shares slid as much as 27% and were last down 21% at 0.50 ringgit ($0.11), and were on track for their biggest one-day loss in three years.

The oilfield-services company said late Friday that its Armada Kraken floating production storage and offloading vessel was "recently shut-in following the failure of critical hydraulic submersible pump (HSP) transformers." It said the financial impact "is expected to be material" for the company.

Shares in Malaysia didn't trade Monday due to a public holiday.

Hong Leong Investment Bank downgraded Bumi Armada to sell from buy and slashed its target price to MYR0.54 from MYR0.87.

Based on Hong Leong analyst Jeremie Yap's estimates, the Armada Kraken FPSO generates around $175 million in revenue a year, or about 35% of Bumi Armada's 2022 revenue.

As the vessel's shut-in period remains unknown, Yap said he assumed a six-month outage for the vessel and cut his 2023 net profit forecast by 38%.

CGS-CIMB also downgraded Bumi Armada to hold from add. The brokerage cut its target price to MYR0.69 from MYR0.87 and slashed 2023 core EPS estimates by 47% to factor in a loss of revenue and costs to be incurred to fix the technical issues.

"Until this incident is resolved, Bumi Armada's share price is unlikely to perform," CGS-CIMB analyst Raymond Yap said in a note.

Write to Ying Xian Wong at [email protected]

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