FY21 results in line
Maintain BUY and MYR0.58 TP
FY21 core earnings made up 95% of our FY estimate, on the back of a sequentially softer 4Q21, mainly due to lower FPSO profits. Its turnaround story is beginning to gain traction. Improving cashflows and
monetizing non-core assets (OSVs & FPSO Claire) are its key KPIs. It will also continue to de-gear, deliver FPSO Kakinada, prospect for new FPSO opportunities and outline its ESG strategy. Our TP is SOP-based.
Snapshot of its 4Q21 performance
Core net profit of MYR141m (-7% QoQ; -25% YoY) in 4Q21 took FY21 core earnings to MYR670m (+44% YoY), in line with our estimate. The QoQ weakness was largely due to lower contributions (-31% EBIT) from its FPSO ops, mainly on higher opex from its FPSO Olombendo, which incurred higher O&M costs. Profits at its associate grew 16% QoQ owing to minimal unplanned expenses (i.e. crew change, Covid) in 4Q21. At its OSV ops, it sold 3 units in 4Q21 (FY21: 20 units), reducing its fleet size to 7 units. Of the 7 units: (i) 1 vessel was classified as ‘non-current assets held for sale’ & (ii) 3 Ice Class units were classified as ‘discontinued ops held for sale’; sold in Jan 2022 for USD44.5m.
De-gearing sustainably
Our estimates are unchanged. Its strategy to constantly generate positive FCFs while keeping opex in check is showing encouraging progress. It: (i) reduced opex by 15% YoY and (ii) repaid USD398m debts in 2021, a positive. This is reflected on its net debt/ net gearing/ net debt-to-EBITDA ratios, which have fallen from MYR7.4b/ 2.4x/ 5.1x in 2020 to MYR6.1b/ 1.5x/ 4.2x (vs. 7-year weightage average of firm charters; a positive) respectively in 2021.
Key targets: Reduce debts, seeks new job(s)
Improving cashflows and monetizing non-core assets (i.e. exit the OSVs ops & sale of FPSO Claire) remain its key KPIs, as well as delivery of the FPSO Kakinada project on schedule by Jun 2022. BArmada will also: (i) seek to refinance its USD loans to improve its cashflows, (ii) prospect for new project(s) for growth and (iii) release its ESG strategy in 2022.