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Bumi Armada: Strong cash flow plus further exposure to commodities upcycle

Thiveyen Kathirrasan
Thiveyen Kathirrasan6/24/2022 08:09 AM GMT+08  • 3 min read
Bumi Armada: Strong cash flow plus further exposure to commodities upcycle
Photo Credit: Bumi Armada
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Performance: -26.8%

Bursa Malaysia-listed Bumi Armada was one of the worst performers in our portfolio for the four-month period, with a 26.8% loss. The company is an international offshore services provider that owns and operates offshore support vessels for exploration, development, and production activities in the offshore oil and gas industry. Bumi Armada’s revenue is generated from its three wholly-owned Floating production storage and offloading (FPSO) units, one wholly-owned floating storage unit (FSU), three jointly-owned FPSOs and one partially-owned FPSO under construction.

The thesis for investing in the company is that it is a good diversification tool within our overall portfolio, as it gives investors exposure to the commodity sector, namely oil. The company also has historically shown strong cash flow and free cash flow generation, and has consistently achieved deleveraging targets. Due to the post-pandemic recovery and the war between Russia and Ukraine, oil prices have held at above US$100 ($137) per barrel — a significant pick-up from just over US$70 a year ago. For companies within the oil and gas value chain such as Bumi Armada, this is naturally good news, as they get to meet increased activities and demand for oil and gas-related services such as floating offshore solutions.

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