Tuesday, February 19, 2019

Buy Armada, Sell Gamuda

For the last 1-1/2 months, Bumi Armada has been a highly traded stock, which is probably unusual considering that it used to be a Composite stock. On a daily basis, its volume can go as high as 500 million stocks traded, i.e. almost 9% of its 5.871 billion issued shares. This shows that there are a lot of traders and speculators with probably syndicates involve in the stock.

When this happens, usually the fundamentals are out of whack. At the moment, there is a tense situation concerning its short term fundamentals and among the analysts even they could not agree closely on the valuation of the company among themselves. The UOB Kay Hian analyst gave a 10sen valuation for Bumi Armada whereas the CIMB analyst gave a 71 sen valuation for the company.

Basically, for me if the UOB's valuation is correct it basically can almost call for bankruptcy or almost liquidation for the company as one of the major concern for Armada is its short term liquidity.

I had written a piece on the stock, and I have less fear over its short term liquidity. I think it is something that can be addressed, which is why I am more inclined towards the analysis provided by CIMB. Hence, I have made a 25,000 units purchase of Armada for the fund and at the same time Sold Gamuda. If one can remember, when I bought Gamuda few months ago, it was also probably out of whack in terms of its pricing for a very good company. The almost termination (underground portion) of MRT2 for Gamuda caused selldown on the stock. It was lingering at around RM2.30 to RM2.45. Now it has gone up and I am taking profits although I do think it will continue to go up.

At the moment, in my opinion, many of the stocks are attractive hence giving me difficulties to pick stocks. With Bumi Armada, I am taking opportunity of its volatility and selldown which I think is wrongly sold especially when it has become a traders stock.

I think over the long run, it will readjust itself, hence I decide to take a small purchase of the stock.


reyes430 said...


would like to seek for your opinion over this news? would be short term debt been extended again in you opinion?


felicity said...

Hi Reyes

I am not surprise if the short term debt is being rollover. I believe Armada can have several options when comes to dealing with this issue. It can share the risk on some of the larger projects, and at the same time raise the necessary funds. It can also tap on the Euro Medium Term Note. Obviously, the second one is not the preferred option.

Another thing is that it is a company or business which I think Ananda will want to have despite the challenges. From the action that it has hired a CEO which is now more than 2 years in the company as well as a CFO which has been hired last year. There shows determination to solve key issues. FPSO business is not a sunset business and Bumi Armada is still one of the largest globally.

It just needs restructuring and get its act together.