Armada: Down But Not Out Yet

Background

Bumi Armada Bhd ("Armada") is an oilfield services company whose business can be grouped into 2 segments: the Offshore Marine Services (OMS) with a fleet of 44 OSVs and 3 SC vessels and Floating Production & Operation (FPO) with 1 LNG FSU and 8 FPSOs.  

Result Update

In QE30/9/2018, Armada reported a smaller net loss of RM503 million as compared to a net loss of RM585 million in the immediate preceding quarter (QE30/6/2018). At the same time, revenue dropped to RM588 million from RM654 million. Armada's finacnial performance in the last 2 quarters was badly affected by impairment made for its FPO segment which amounted to RM479 million in QE30/6/2018 and RM502 million in QE30/9/2018.

Table:Armada's last 8 quarters' P&L


Graph: Armada's last 18 quarters' P&L

Financial Position & Loan Repayment/Extension

Armada's financial position is quite tight, with current ratio at 0.47 time and total liabilities totital equity at 2.70 times. The tight financial position is reflected in its need to extend part of its loans of USD500 million that fell due in October. Armada settled USD120 million and the remaining USD380 million is now subject to negotiation for extension. For more on the loan outstanding and its status, go here.

Valuation

Armada (closed at RM0.18 in the morning session) is now trading at a Price-to-Book of 0.2 time (based on NTA per share of RM0.81 as at 30/9/2018). We cannot compute its PER as it has a net loss of RM976 million in the past 4 quarters.

Technical Outlook

Armada broke below the RM0.50 horizontal line in early October. This launched the share price into a deep dive, with a short pause at RM0.38 and RM0.32. The indicators show the stock is oversold. With the huge volume of 447 million shares transacted on Thursday and Friday last week as well as 147 million shares traded this morning, we may show be seeing a bottom for the stock. Whether it will be the final bottom or just a temporary bottom will be decided latter.


Chart 1: Armada's monthly chart as at Dec 3_12.30pm (Source: MalaysiaStock.Biz)


Chart 2: Armada's daily chart as at Dec 3_12.30pm (Source: MalaysiaStock.Biz)

Conclusion

Despite the weak financial position and poor financial performance, Armada still has a decent chance of pulling through in view of its strong management. This is helped by signs of recovery in the oilfield services sector- despite recent weakness in crude oil prices. Due to the sharp drop in share price, Armada could be a good stock to a recovery play. However, given the uncertainty involved, you should not take an oversize position in the stock just yet. Slow accumulation will be safer. Good luck!

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.