BUMI Armada’s first half of financial year 2025 (1HFY25) core profit of RM278.9 mil came within Kenanga Research’s expectations at 57%.
But it is seemed slightly below consensus at 48.9% as FPSO Kraken has been at a lower renewed charter rate since April 25. No dividends were declared in the quarter.
“1HFY25 revenue slipped 27% due to commencement of the FPSO Kraken optional charter in April 25 which was at a lower rate to the previous charter rates,” said Kenanga.
As a result, core profit dropped 37% as operating costs remained largely unchanged while JV contributions remained stable. That aside, exploration and evaluation expense incurred for Akia PSC also led to weaker earnings.
Quarter-on-quarter (QoQ), the top line declined 14% due to lower charter income from FPSO Kraken. As a result, core profit declined 48% as operating costs edged up QoQ due to repair and maintenance costs from FPSO Olembendo.
From quarter two of 2025 onwards, FPSO Kraken will operate under its optional charter (17 one-year renewals), with lower rates expected to materially impact earnings.
Upstream capital expenditure for Projects Akia and Kojo would not be anticipated in the next two years, though sustained exploration expenses may continue to drag short-term profitability.
ARMADA’s own balance sheet is expected to strengthen by financial year 2026 forecast, potentially positioning the group to pursue new mid-sized FPSO opportunities independently.
We like ARMADA due to its better net gearing position as the group has not incurred significant capital expenditure in the past 5 years as there were no major FPSO wins.
Also, it has long-term earnings visibility from the sizable order book above RM9.1 bil, and not forgetting, strong recurring free cash flow generation post FPSO Kraken debt full repayment.
While the group has yet to secure major FPSO job to replace FPSO Kraken’s previous firm earnings, we believe that its earnings might have bottomed with a stable trend expected in the coming quarters.
Bumi Armada has been u[graded to outperform from market perform. —Aug 29, 2025
Main image: Bumi Armada
