BAB: Operational Efficiencies Bolster Performance, Analysts Reiterate Buy Rating
| Metric | Value |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company’s 2025 core net profit of RM466 million landed within both analyst and consensus expectations, representing 97% of the firm’s forecasts and 98% of market consensus. This performance was achieved despite a notable 31% year-on-year decline in 2025 revenue to RM1.6 billion, primarily due to softer operational performance from the Kraken FPSO and the commencement of its annual option-period charter at reduced rates from April 2025.
In the fourth quarter of 2025, revenue experienced a marginal 4% quarter-on-quarter slip to RM347 million. However, this period saw a significant expansion in the EBITDA margin by 17.8 percentage points quarter-on-quarter, driven by leaner operating costs and reduced reimbursable expenses from the Kraken FPSO. Despite these operational efficiencies, core net profit for 4Q25 declined 5% quarter-on-quarter to RM91 million, mainly impacted by a lower share of joint venture profit. The company’s net gearing continued to show improvement, reducing to 0.2x from 0.4x at the end of 2024. A similar 1 sen dividend was declared for 2025, consistent with the previous year.
Future Outlook and Strategic Initiatives
Looking ahead, the research highlights positive developments in the company’s tender pipeline. The Jalu PSC bid in Indonesia is expected to be finalised in the second quarter of 2026, with FPSO Front-End Engineering Design (FEED) work progressing well towards late 2Q26 completion. The company is also actively exploring new project opportunities with joint venture partners, with an aim to bid for two additional projects.
The firm maintains a positive long-term view, citing the company’s healthy vessel order book of RM7.9 billion, which provides robust earnings visibility for the next five years. Management is also considering the introduction of a formal dividend policy or share buybacks, which could serve as a re-rating catalyst for the stock.
Analyst Recommendation
The investment bank has reiterated its BUY rating for the stock, with an unchanged DCF-derived 12-month target price of RM0.66. This implies a significant upside from the last close price of RM0.315. Key risks to this positive outlook include unforeseen operational delays in existing FPSOs, higher operating costs, and a sharp decline in global oil prices.
