Broker: Phillip Research Sdn Bhd (Malaysia)
Date of Report: 23 May 2025
Bumi Armada 1Q25 Results: Earnings Miss, Forecasts Cut, But BUY Maintained Amid FPSO Challenges
Introduction: Bumi Armada Delivers Mixed 1Q25 Results
Bumi Armada Berhad (BAB MK), a leading player in Malaysia’s oil and gas sector, recently released its 1Q25 financial results, revealing a mixed performance that fell below expectations. Despite a notable year-on-year increase in core net profit, key revenue streams faced headwinds, prompting earnings forecast revisions. Here’s a comprehensive breakdown of the company’s latest results, operational updates, and outlook as analyzed by Phillip Research.
Financial Highlights: Revenue Dip and Margin Pressure
BAB reported a 1Q25 core net profit of RM182 million, up 27% year-on-year but still below market and analyst expectations. The company’s quarterly revenue fell sharply to RM474 million—a 25% year-on-year drop. The primary cause was the recognition of compensation payable to EnQuest, the charterer for FPSO Kraken, due to the extension of its second annual option to 1 April 2027. This payment relates to estimated penalties for non-performing equipment on the FPSO Kraken, but no further payments are expected in subsequent quarters.
The company also faced a 3.3 percentage-point contraction in EBITDA margin, contributing to a 27% year-on-year decline in core profit. Notably, 1Q25 results accounted for 29% of previous full-year forecasts, reinforcing the view that results were broadly below expectations, especially as FPSO Kraken’s day charter rate (DCR) is set to drop by 70% from April 2025, further impacting future earnings.
Key Financial Figures: 2023-2027 (RM million, unless stated)
| Year Ended Dec | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue | 2,133.1 | 2,299.2 | 1,639.0 | 1,533.0 | 1,487.0 |
| EBITDA | 1,275.7 | 1,501.8 | 941.0 | 924.2 | 933.6 |
| Pretax Profit | 296.1 | 646.1 | 678.4 | 768.3 | 815.3 |
| Net Profit | 332.1 | 634.0 | 555.8 | 627.6 | 665.3 |
| EPS (sen) | 5.7 | 10.7 | 9.4 | 10.6 | 11.2 |
| PER (x) | 9.0 | 4.8 | 5.4 | 4.8 | 4.5 |
| Core Net Profit | 751.8 | 987.1 | 555.8 | 627.6 | 665.3 |
| Core EPS (sen) | 12.8 | 16.7 | 9.4 | 10.6 | 11.2 |
| Core EPS Growth (%) | (0.4) | 29.9 | (43.7) | 12.9 | 6.0 |
| Net DPS (sen) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Dividend Yield (%) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| EV/EBITDA (x) | 5.1 | 3.5 | 3.9 | 3.1 | 2.4 |
Operational Updates: Kojo PSC, FPSO KGW 98/2, and Merger Talks
- Kojo PSC Exploration: Management provided new insights into the recently announced Kojo PSC, located adjacent to the Ruby gas field, which is operated by Mubadala Energy. BAB’s planned investment is minimal—just US\$1.5 million over three years, primarily for a 2D seismic study. This conservative approach keeps capital risk low and is easily covered by the company’s robust operating cash flow.
- FPSO KGW 98/2: Thanks to prudent accounting, this asset is on track to achieve profitability by the end of 2025, with depreciation spread over its nine-year firm charter. Although currently recording minor losses, the asset remains cash flow positive, supporting BAB’s financial stability.
- Merger with MISC’s OBU Business: There were no significant updates on the potential merger with MISC’s Offshore Business Unit (OBU). Discussions are ongoing, but management has not committed to a timeline for a final decision.
Balance Sheet and Gearing: Improved Financial Position
- Bumi Armada’s net gearing improved to 0.34x at the end of 1Q25, down from 0.37x at end-2024, demonstrating ongoing deleveraging and financial discipline.
Updated Outlook and Valuation: Forecasts Cut, BUY Maintained
Phillip Research revised its 2025–2026 earnings per share (EPS) forecast down by 9–12% to reflect the weaker expected contribution from FPSO Kraken as the option period begins in April 2025. The BUY rating is maintained, but the 12-month discounted cash flow (DCF)-derived target price is lowered to RM0.79 (from RM0.93). The new target price still represents significant upside from the last close at RM0.51, with a potential total return of 56.4%.
Risks to Outlook
Key risks to the positive outlook include:
- Unforeseen operational delays in existing FPSO units
- Higher-than-expected operating costs
- A sharp decline in global oil prices
Shareholder Structure and Price Performance
- Major Shareholders:
- Objektif Bersatu Sdn: 34.6%
- Amanah Saham Nasional: 13.1%
- Norges Bank: 4.4%
- Market Capitalization: USD 702 million / RM 2,994 million
- Outstanding Shares: 5,928 million
- 52-Week High/Low (RM): 0.70 / 0.41
- 3-Month Average Daily Trading Volume: 11.43 million shares
- Net Debt: RM1,221 million
Price Performance (%):
- 1 Month: +13.0%
- 3 Months: -7.8%
- Year-to-Date: -19.1%
For comparison, the FBMKLCI index returned 3.1% (1 month), -1.0% (3 months), and -4.1% (year-to-date).
Results at a Glance: Quarter-on-Quarter and Year-on-Year Changes
| Metric | 1Q24 | 4Q24 | 1Q25 | QoQ % chg | YoY % chg | Comments |
|---|---|---|---|---|---|---|
| Revenue (RMm) | 635.5 | 533.0 | 474.0 | -11.1 | -25.4 | Lower contribution from FPSO Kraken and Olombendo |
| Operating Costs (RMm) | (218.9) | (176.5) | (179.1) | +1.5 | -18.2 | |
| EBITDA (RMm) | 416.7 | 356.5 | 294.8 | -17.3 | -29.2 | |
| EBITDA Margin (%) | 65.6 | 66.9 | 62.2 | -4.7ppt | -3.3ppt | Lower revenue |
| Depreciation (RMm) | (76.4) | (73.0) | (67.3) | -7.8 | -11.9 | |
| EBIT (RMm) | 340.2 | 283.5 | 227.5 | -19.7 | -33.1 | |
| EBIT Margin (%) | 53.5 | 53.2 | 48.0 | -5.2ppt | -5.5ppt | |
| Interest Expense (RMm) | (79.1) | (78.5) | (69.8) | -11.0 | -11.8 | |
| Interest Income (RMm) | 16.2 | 14.3 | 20.5 | +43.1 | +26.9 | |
| Associates (RMm) | 3.2 | (17.0) | 12.5 | n.m. | +295.3 | Absence of incurred costs from Sterling V FPSO |
| Exceptional Items (RMm) | (10.2) | (297.2) | 0.4 | n.m. | n.m. | Forex losses RM0.4m |
| Pretax Profit (RMm) | 270.2 | (94.9) | 191.1 | n.m. | -29.3 | |
| Core Pretax (RMm) | 280.4 | 202.4 | 190.7 | -5.8 | -32.0 | |
| Taxation (RMm) | (7.1) | 18.7 | (3.5) | -118.6 | -51.2 | |
| Tax Rate (%) | 2.6 | 19.7 | 1.8 | -17.9ppt | -0.8ppt | |
| MI (RMm) | (22.6) | (7.6) | (4.8) | -36.7 | -78.6 | |
| Net Profit (RMm) | 240.5 | (83.8) | 182.8 | +318.0 | -24.0 | |
| EPS (sen) | 4.1 | (1.4) | 3.1 | +318.0 | -24.0 | |
| Core Net Profit (RMm) | 250.7 | 213.4 | 182.4 | -14.5 | -27.3 | Below expectations |
Conclusion: BUY Maintained for Bumi Armada Despite Near-Term Pressures
Despite a disappointing 1Q25 with lower-than-expected core net profit and revenue, Bumi Armada retains solid fundamentals and strong cash flow generation. While the FPSO Kraken’s rate decline weighs on near-term forecasts, prudent management of costs and new ventures like Kojo PSC position the company for a steady recovery. The improved balance sheet, continued deleveraging, and a maintained BUY rating with a healthy upside make Bumi Armada a stock to watch for investors seeking value in Malaysia’s oil and gas sector.
