Bumi Armada climbs to near three month high on MISC’s potential stake acquisition

KUALA LUMPUR (July 9): Shares of Bumi Armada Bhd (KL:ARMADA) surged to a nearly three-month high on Tuesday, following news of a potential stake acquisition by MISC Bhd (KL:MISC) in the floating production storage and offloading (FPSO) company.

The counter rose as much as 6.9% to an intraday high of 62 sen, its highest level since April 15, 2024. At the closing bell, the share price of Bumi Armada was two sen or 3.45% higher at 60 sen, giving it a market capitalisation of RM3.56 billion.

Trading volume surged to 115.25 million shares, the highest since Feb 28, 2024, which is more than five times its 200-day average volume of 19.86 million shares.

Bumi Armada has 12 “buy” calls and two “hold” calls, with a 12-month target price of 71 sen, reflecting an upside potential of 14.5% from Tuesday’s close. Year-to-date, it has gained 20%.

The Edge Weekly, in its July 8-14 issue, reported that MISC is in talks with Bumi Armada shareholders to acquire a substantial stake in the company. Bumi Armada said that it is actively exploring investment opportunities that have the potential to add value to its shareholders.

Bumi Armada’s largest substantial shareholders are billionaire businessman Ananda Krishnan with a 34.58% stake, various funds under state-controlled asset management outfit Permodalan Nasional Bhd with a 13.25% stake and privately held Saluran Abadi Sdn Bhd, the vehicle of Farah Suhanah Ahmad Sarji with a 6.08% stake.

Meanwhile, MISC said in a stock exchange filing on Tuesday that there is no confirmed deal regarding the stake purchase in Bumi Armada. “While MISC continues to explore growth opportunities, in its ordinary course of business, there is currently no development within any opportunity that would necessitate disclosure.”

In a research report by BIMB Securities Research on MISC, it expressed doubts about MISC’s potential stake acquisition in Bumi Armada, citing a lack of economic justification. The firm noted that numerous other investment opportunities could provide greater returns for shareholders.

“For example, there is strong demand for FPSO currently amidst the upcycle in offshore development projects. We understand that MISC is evaluating new FPSO project opportunities as the ongoing project in hand (FPSO Mero 3) is close to completion.

“Locally, as reported by upstream news, there will be tenders for two FPSO projects, namely the new Salam-Patawali FPSO (ConocoPhillips) and the Kikeh replacement FPSO (PTTEP). Given the funding issues that are faced by the company and FPSO players globally, we think the said acquisition is a waste of financial resources,” BIMB added.

BIMB has a “buy” call on MISC with an unchanged target price of RM10.30.

For the first quarter ended March 31, 2024, Bumi Armada Bhd’s net profit rose 19.7% to RM240.54 million from RM201.01 million a year earlier, as revenue increased 16.8% to RM635.54 million from RM543.99 million previously.

Read Also:

MISC could take a substantial stake in Bumi Armada

Bumi Armada’s 1Q net profit up 19.7% on higher vessel operations revenue

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