Technical tracker - HLIB Retail Research – 29 March 2022 ARMA | HLeBroking

Technical tracker - HLIB Retail Research – 29 March 2022

ARMADA: Accumulate on weakness

Buy the dip. Being HLIB’s O&G top pick, ARMADA’s share price has plunged 26% from a 52-week high of RM0.575 to close at RM0.425 yesterday, as widespread sanctions on Russia following the conflict with Ukraine triggered concerns over ARMADA’s subsea construction vessels (i.e. Armada Installer and Armada Constructor) that is currently contracted with Lukoil (a Russian energy MNC) in the Caspian Sea up to end-2022. Overall, we reckon that the Russia-Ukraine conflict has no material impact on ARMADA as Lukoil has not been sanctioned by US or Europe. Based on our channel check with the group's management, there has been no ground indication of default/non-payment risk from Lukoil.

Recurring nature business. To recap, ARMADA currently has four fully-owned FPSOs and three JV FPSOs. The FPSOs business is stable with recurring income and cash flow throughout the tenure period, and its performance is independent from oil price volatility and movement. While the risk of default from the oil producing entitles will be a potential risk for ARMADA’s FPSOs business, we note that National Oil Companies (NOCs; O&G companies that are majority-owned by a national government e.g. Pemex and Saudi Aramco, etc.) producing entitles’ breakeven cash-flow levels is around Brent oil price of USD30-35/bbl while profit-after-tax breakeven would be around US$45-50/bbl (versus Brent oil prices above USD100 now). The high oil prices that keep NOCs producing entitles profitable will lower default risk to ARMADA.

Also, the ongoing disposal activities in its OSV is deemed to be earnings accretive given the absence of its loss in the OSV segment would enhance ARMADA’s FY22 profits by RM75.5m or 10.7%. The utilisation of proceeds will be used to pare down its debt and further strengthen its balance sheet. Despite vast improvement in its balance sheet coupled with a better earnings outlook, ARMADA is currently trading at an undemanding valuation of 3.5x FY22 P/E (72% and 50% discount against its 5-year average of 12.5x and HLIB’s TP parameter of 7x, respectively). Shrugging off Lukoil’s risk, we believe that the battered stock offers excellent opportunity for investors to accumulate on weakness.

Resistance breakout. After staging a 14% oversold rebound, ARMADA is currently challenging its mid-term resistance of RM0.43. A successful breakout above this hurdle will spur the prices toward RM0.47-0.50 levels. Cut loss at RM0.38

Collection range: RM0.40-0.41-0.42

Upside targets: RM0.46-0.50-0.54

Cut: RM0.38

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Technical tracker - HLIB Retail Research – 29 March 2022

ARMADA：逢低吸纳

逢低买入。作为 HLIB 的油气行业首选，ARMADA 的股价已从 52 周高位RM 0.575 下跌 26%并在昨日收于RM 0.425 ，主要因为乌克兰冲突后使俄罗斯公司受制裁引发了对 ARMADA 海底施工船的担忧（目前与一家俄罗斯能源跨国公司, Lukoil在里海签订的合同至 2022 年底）。总体而言，我们认为俄罗斯与乌克兰的冲突对 ARMADA 没有实质性影响，因为Lukoil石油公司并未得到美国或欧洲的制裁。根据我们与集团管理层的查询，Lukoil石油并没有违约/不付款的风险。

持续性的业务。ARMADA 目前拥有四个全资 FPSO 和三个合资 FPSO。 FPSO 业务在整个任期内表现稳定，经常性收入和现金流量也相当稳定，其业绩也不受油价波动的影响。虽然石油生产国的违约风险将成为 ARMADA FPSO 业务的潜在风险，但我们注意到国家石油公司（NOC；由国家政府持有多数股权的油气公司，例如 Pemex 和沙特阿美等）生产成本在布伦特原油价格 30-35 美元/桶左右，而税后盈亏点将在 45-50 美元/桶左右（而布伦特原油价格目前高于 100 美元），这使 NOC 因高油价而保持盈利从而降低了 ARMADA 的违约风险。

此外，其出售其OSV业务被认为可增加收益，因为 OSV正实现亏损。少了这个亏损业务后， ARMADA 的 FY22 利润增加 7550 万令吉或 10.7%。此外，其出售获得的资金将用于削减其债务并进一步加强其资产负债表。尽管资产负债表和盈利前景大幅改善，ARMADA 目前的交易估值仅为FY22 P/E 3.5 倍（相对于 5 年平均 12.5 倍和 HLIB 的 TP 参数7倍分别相差 72% 和 50%）。撇开Lukoil的风险，我们认为受ARMADA股价的疲软为投资者提供了逢低买入的机会。

阻力突破。在经历了 14% 的超卖反弹后，ARMADA 目前正在挑战其RM 0.43 的中期阻力位。股价若成功突破这一关口将推动价格升至RM 0.47-0.50 水平。投资者可以把止损设置在 RM0.38。

买入范围：RM0.40-0.41-0.42

上行目标：RM0.46-0.50-0.54

止损：RM0.38

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