Bumi Armada Hits Near Three-Month High on Potential MISC Stake

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

The gauge rose 6.9% to an intraday high of 62 sen, its highest level since April 15, 2024. At the close, Bumi Armada shares were two sen or 3.45% higher at 60 sen, giving a market capitalisation of RM3.56 billion.

Trading volume increased to 115.25 million shares, the highest since February 28, 2024, and more than five times the 200-day average trading 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 potential upside of 14.5% from Tuesday’s close. It has gained 20% year to date.

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

Bumi Armada’s largest shareholders are billionaire Ananda Krishnan with a 34.58% stake, various funds of state-controlled asset management company Permodalan Nasional Bhd with a 13.25% stake, and private company Saluran Abadi Sdn Bhd, owned by Farah Suhanah Ahmad Sarji, with a 6.08% stake.

Meanwhile, MISC said in a stock exchange filing Tuesday that it has no confirmed agreement to buy a stake in Bumi Armada. “While MISC continues to explore growth opportunities, as part of its normal business, it currently has no developments in any opportunity that require disclosure.”

A BIMB Securities Research report on MISC expressed doubts about MISC’s potential acquisition of a stake in Bumi Armada, citing a lack of economic justification. The company noted that many other investment opportunities could provide shareholders with greater returns.

“For example, there is currently a strong demand for FPSOs due to the growth cycle in offshore development projects. We understand that MISC is evaluating new opportunities for FPSO projects as the ongoing project (FPSO-Mero 3) is almost finished.

“Locally, as reported by upstream news, tenders will be held for two FPSO projects, namely the new Greetings to FPSO (ConocoPhillips) and Kikeh FPSO replacement (PTTEP). Considering the financial problems faced by the company and FPSO players worldwide, we believe that the said acquisition is a waste of financial resources,” BIMB added.

BIMB issued a buy recommendation on MISC shares 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, while revenue rose 16.8% to RM635.54 million from RM543.99 million previously.

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Bumi Armada’s net profit in Q1 increased by 19.7% thanks to higher revenue from ship operations