ARMADA: Core Earnings Meet Forecasts on Efficiency, Strong Outlook Fuels Target Price Revision
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates a stable financial performance, with core PATAMI for the third quarter of fiscal year 2025 (3QFY25) coming in at RM96.4 million, remaining largely flat quarter-on-quarter (QoQ). This brings the nine-month (9MFY25) core PATAMI to RM375.2 million, successfully meeting both the investment bank’s and market consensus full-year estimates at 75.0% and 72.8% respectively.
Performance Review
The stable QoQ core PATAMI was achieved despite lower operating and maintenance revenue, primarily due to significant reductions in exploration expenses for the Akia production sharing contract (PSC) and the absence of prior foreign exchange (FX) translation losses. Additionally, the non-recurrence of a one-off trustee distribution also contributed to the overall stability.
On a year-on-year (YoY) basis, however, earnings experienced a 62.3% decline. This was largely anticipated and reflects the transition of a major Floating Production Storage Offloading (FPSO) asset, Armada Kraken, into its annual option period from April 2025, which carries approximately 70% lower charter rates compared to its firm period. Despite these shifts, operational reliability remained strong, with owned FPSOs achieving an impressive 98.7% uptime and joint venture units maintaining 100% reliability, underscoring the predictability of cash flows from the existing fleet.
Net operating cash flow for 3QFY25 was RM171 million, a 54% QoQ decrease, primarily due to a timing mismatch where one charter payment missed the cut-off period. Nonetheless, the company demonstrated a disciplined balance sheet strategy by repaying USD89 million (RM374 million) of debt, further improving its net gearing to a healthy 0.25x. This strategy involves maintaining an optimal cash buffer to support equity capacity for upcoming FPSO bids while consistently reducing leverage.
Strategic Initiatives and Future Outlook
The company is well-positioned for several key catalysts in 2026, benefiting from its low net gearing and steady existing FPSO operations. These anticipated developments include the release of Akia PSC 3D seismic results, progress on the ongoing FPSO Front End Engineering and Design (FEED) decision, potential project awards, the emergence of new FPSO tenders in core regions, and advancements in CO2 floating storage and injection unit (FSIU) projects.
The investment bank maintains its BUY recommendation on the stock, with a target price of RM0.25. This target price represents a potential upside of 25.0% from the last traded price of RM0.20, reflecting confidence in the company’s operational strength and bright future prospects.
