Affin Daily Insight (LV) - 31 March 2014 - BAB / ECONOMY / DMR / MN

Top Calls

Company Update � Bumi Armada (ADD, downgrade) Bright prospect is partly clouded by lower accounting profit Bumi Armada adopted a new accounting treatment for its large projects and the group now evaluates its new FPSO contracts on a case-by-case basis where longer tenured, large-scale FPSO projects will be treated as a financing lease. We have lowered our 2014-16E EPS by 29-33% to account for the changes in accounting treatment. However, we note that the changes are accounting in nature with no impact to the underlying cash flow and project IRR. We are switching our valuation methodology from PER multiple to sum-of-the-parts (�SOTP�) and value Bumi Armada at RM4.17 (from RM4.50). Downgrade to ADD (from BUY) in view of the lower upside potential. Notwithstanding our earnings, TP and rating cut, we continue to like Bumi Armada for its: (i) strong earnings growth; (ii) a proxy to the buoyant global FPSO market; and (iii) good exposure to the lucrative Caspian Sea O&G market.

Other Calls

Economy � ASEAN outlook � Weekly Wrap (24 � 28 March 2014) Asean�s IPI and exports likely to improve in February

Debt Market Research Well received MGS 9/21 to provide catalyst for risk-on sentiment

Morning News and Market Summary

For important disclosures, please refer to the Disclosure section at the end of the individual linked research reports.

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