KUALA LUMPUR: Analysts heaved a sigh of relief with the latest update from Bumi Armada Bhd on its floating production storage offloading (FPSO) Armada Kraken's update, but stopped short of making any changes to its financial forecasts, until the FPSO reaches optimal level and more clarity on the financial impact of the shutdown.
Yesterday, Bumi Armada announced that the Armada Kraken FPSO was running at 90 per cent following the installation of a reconditioned transformer.
Bumi Armada's share price was up 2.9 per cent to 53 sen as at 10.15am, on the news of the update on the FPSO
"We now realise it (the FPSO's technical issues) is not as severe as expected. However, we highlight that there is a good possibility that because of its current suboptimal production levels (optimal would be 95 per cent and above), the group may not be able to rake in full bareboat charter rates until the problem gets fully resolved," Hong Leong Investment Bank (HLIB) said in a note.
The FPSO is currently running on two out of four HSP transformers after one of the faulty ones was reconditioned.
The research firm had imputed a six-month downtime for the FPSO based on a daily charter rate of US$480,000/ a day (or US$175 million/year).
The firm maintained a 'Buy' call on Bumi Armada with a higher target price of 71 sen from 54 sen previously.
"To be conservative, we make no changes to our forecasts and we now believe that there is a possibility of upside earnings risk to our financial year 2023 net profit estimates," it said.
Public Investment Bank (PublicInvest) which had cut financial year 2023 revenue and earnings estimates on estimates that the FPSO would be shutdown for a total of three months decided to keep its numbers for now until they get more clarity the financial impact of the FPSO shutdown in the upcoming quarter's reuslts.
PublicInvest cut FY23 revenue and earnings estimates by RM150 million and RM66 million respectively.
It has an 'Outperform' rating for the company with an unchanged target price of 70 sen.