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.
