Bumi Armada Bhd has received an updated environmental, social and governance (ESG) score of 51 out of 100, reflecting a decline from its previous score of 58 for the fiscal year 2022. Maybank Investment Bank Bhd has maintained a BUY call on the company, with an unchanged sum-of-parts-based target price of 68 sen. Maybank IB noted that further upside could be realised through the potential extension of Bumi Armada's Floating Production Storage and Offloading TGT1 contract, which is due to expire next month.
The company reported an increase in Scope 3 emissions for the second consecutive year, with figures rising to 984.6 thousand tonnes of CO2 equivalent (tCO2e) in fiscal year 2023 (FY23) compared to 975.1 thousand tCO2e in FY22. Overall greenhouse gas (GHG) emissions for Bumi Armada totalled 986.9 thousand tCO2e in FY23, a slight decrease from 987.8 thousand tCO2e the previous year. The group's GHG intensity, measured by revenue, increased to 0.46 thousand tCO2e per RM million in FY23, up from 0.41 thousand tCO2e per RM million in FY22. Energy consumption intensity also rose to 1.70 gigajoules per tonne of production, up from 1.52 gigajoules per tonne in FY22.
On a more positive note, Bumi Armada has demonstrated improvements in certain social metrics, with women comprising 44% of its workforce in FY23, up from 43% in FY22. Additionally, the company recorded a significant increase in training hours per employee, rising to 42 hours in FY23 from 30 hours in FY22. Bumi Armada also achieved a zero rate for Lost Time Injury Frequency (LTIF) in FY23, down from 0.49 in FY22, indicating a strong safety performance.
While the company has set ambitious goals, such as achieving net-zero carbon emissions by 2050 and has begun to track Scope 3 data related to business air travel and employee commuting, analysts suggest that there is room for improvement. Notably, the remuneration of senior management is not currently linked to the achievement of ESG targets, which could be an area for future enhancement.
Bumi Armada's share price currently stands at 50 sen, with a 12-month TP of 68 sen representing a potential upside of 35%. With a market capitalisation of RM3 billion, the company operates in the oil and gas sector, providing essential engineering, maintenance and operational services. Bumi Armada continues to navigate the challenges of balancing environmental impacts while pursuing its strategic goals within the competitive energy market.
