Yet another BUMI update30 Aug 2018 09:01
This is a new analyst update from CIMB investment bank, the Malaysia HQd arm of the CIMB group. This is their note that I borrowed from the BUMI message board.
Interestingly, their research note states that the BUMI management thinks that Final acceptance will be done in 2 weeks time, which is possible given all the goings-on with AK recently, as speculated yesterday. Also, CIMB also reckons that the additional $10 million costs provision in BUMI's P&L is to actually fix AK to make her 'acceptance ready' and for post checks.
BUMI is optimistic, maybe way too so, given their history of failed promises thus far. But, we shall see. And CIMB also mentions 'technical failure' to deliver oil in the quantity and specs needed, which required the additional provisions we saw yesterday, presumably as a result of lowered day rates going forward.
Maybe 12 days offloads will be the norm going forwards, at least until DC4 comes online. We'll say what AB says next Friday...
GLA
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CIMB Research:
TP: RM0.72, BAB told CIMB that final acceptance is expected within 2 weeks.
Up to the market to believe it or not.
But if it indeed happens, then a strong rebound can be expected.
However, management is a famous promise breaker, so keep that in mind.
Bumi Armada
Kitchen-sinking done; only upside from here?
■ BAB’s 1H18 core net profit underperformed at only 28% of our previous FY18F
forecast, due to compensation provisions made in 2Q18 relating to the Kraken FPSO.
■ BAB shocked the market with a huge 2Q18 net loss of RM586m, due to even more
penalty provisions for Kraken, which is the only BAB asset without final acceptance.
■ BAB expects final acceptance within two weeks, a final compensation agreement with
EnQuest has already been signed, and the kitchen-sinking was already done in 2Q18.
■ We incorporate the penalties and cut our SOP-based target price to 72 sen, but keep
an Add as the risks are to the upside, particularly after the sell-off yesterday.
Highlights of 2Q18
First, BAB agreed to pay EnQuest US$15m as the full and final settlement for all claims prior to 31Jul 2018. Second, BAB expects to incur a further US$10m in costs to bring the FPSO to
final acceptance and to complete a checklist of items post-final acceptance.
RM477.2m (US$119m) impairment on the FPSO Kraken in relation to the
penalties imposed by EnQuest for the technical failure to deliver oil in the
quantities and specifications required;
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