---
title: "Bumi Armada Fell 31%. Follow the Cash."
description: "Bumi Armada's profit fell 31%, yet it still generates about RM1 billion in operating cash a year. The gap comes down to an accounting quirk."
url: "https://www.mrmoneytv.com/articles/bumi-armada-profit-drop-cash-flow/"
category: "Investing & Market"
author: "Frankie Lim"
published: 2026-07-16
source: "Mr Money TV"
---
# Bumi Armada Fell 31%. Follow the Cash.
Bumi Armada's profit fell 31%, yet it still generates about RM1 billion in operating cash a year. The gap comes down to an accounting quirk.
## Key takeaways
- Bumi Armada's net profit fell about 31% to RM439 million, from RM636 million the year before, but the fall came from finance-lease accounting rather than any drop in its charter business.
- Operating cash flow is far larger than reported profit and has run between roughly RM1 billion and RM1.7 billion a year for five years, so the business generates substantial cash even in a year its accounting profit falls.
- FPSO charters are booked as finance leases, which front-load accounting profit into a contract's early years and shrink it later even though the cash the customer pays stays level, so a falling profit line can mask steady cash collection.
- Bumi Armada trades at roughly 0.36 times book value with a market value near RM2.1 billion, so the market prices the whole company at little more than a third of the net assets on its balance sheet.
- Velesto Energy shows the re-rating template: after lifting its dividend payout from under 50% to more than 100% of profit, its shares rose from an all-time low of 7.5 sen in July 2022 to around 30 sen.
- Ordinary Malaysians already own a slice of Bumi Armada, since PNB's ASB and ASM funds hold more than 13% of the company and the EPF a smaller stake, so any re-rating touches household savings directly.
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A 31% drop in profit usually sends investors for the exit. For Bumi Armada, it might be the most interesting thing to happen to the stock in years.
The oil and gas group reported net profit of [RM439 million](https://theedgemalaysia.com/node/794359), down from RM636 million the year before. The stock, already unloved, slid further and now trades at roughly a third of its book value. That looks like a company in decline. But the charter business behind the profit line kept collecting close to a billion ringgit of cash over the same year.
## 1. The profit line is the wrong number to watch
Net profit is a poor guide to what Bumi Armada actually earns. The RM439 million is what survives after the accounting treatment of its vessel leases. The operating cash the business collected was more than double that, around RM1.04 billion, and it has stayed near or above a billion ringgit for five years running while reported profit swung between RM332 million and RM732 million.
So the market values the entire company at barely two years of its operating cash, while reacting to a profit figure that the accounting pushes lower every year a contract ages.
## 2. The ocean landlords
Picture an oil rig, except instead of a fixed platform it is a ship as long as a few football fields, anchored in open sea. It pulls oil from the seabed, processes it on deck, stores it in the hull, and loads it onto tankers. That is an FPSO, a floating oil factory. [Bumi Armada](https://www.bumiarmada.com/) owns and operates several of them and leases them to national and international oil companies on contracts that typically run 10 to 15 years, collecting a charter fee for as long as the lease lasts. It is a landlord business, except the apartments are billion-ringgit vessels at sea.
The largest shareholder is a name most Malaysians have handed money to without thinking about it. Close to 35% of the company is held through Objektif Bersatu, part of the Usaha Tegas group built by the late Ananda Krishnan, the tycoon behind Astro and Maxis, who died in November 2024. The stake stays with his private vehicle.
For years the market fixated on one vessel, the Armada Kraken, deployed in the North Sea for the oil company EnQuest. Technical problems dogged it. In a single quarter of 2018 Bumi Armada wrote down about RM477 million on that one ship, and it later [paid EnQuest US$15 million](https://www.offshore-energy.biz/bumi-armada-to-pay-15-million-for-kraken-fpso-settlement/) to settle a dispute over its performance. The mess dragged the company to a RM2.3 billion loss for that full year. That is the Bumi Armada many people still picture, a company bleeding cash over a broken ship. It has posted seven straight profitable years since.
## 3. Why the profit shrinks while the cash keeps coming
Think about your own pay slip. Your gross salary and the amount that lands in your bank account are two different numbers, because EPF, SOCSO and tax get carved out first. Nobody panics over that gap. Companies have their own version of it, and Bumi Armada's is unusually wide.
Asked directly about the profit drop, the company gave an accounting explanation rather than blaming oil prices or a broken vessel. FPSO charters are booked as finance leases, and finance leases recognise profit on a front-loaded basis. Each year the customer pays a flat charter fee, split into a principal portion and an interest portion. In the early years the split leans towards interest, so the accounts show more profit on the same cash. As the years pass and most of the lease is paid down, the interest portion shrinks, and reported profit shrinks with it, even though the cash collected has not changed.
Accounting profit can be reshaped by depreciation schedules, lease treatment and impairments. Cash is harder to argue with, and Bumi Armada keeps collecting it. The harder part is getting the market to believe it, and one Malaysian company has already shown how.
## 4. The Velesto playbook
[Velesto Energy](https://velesto.com/), the former UMW Oil & Gas, traded at the same kind of depressed level Bumi Armada does now. In July 2022 it hit an all-time low of 7.5 sen. The market had written it off.
Then it changed one thing. It stopped hoarding cash and started paying most of it out, lifting its [dividend payout from under 50% of profit to more than 100%](https://www.thestar.com.my/business/business-news/2025/10/23/velesto-energy-eyes-higher-dividend-payout) within a couple of years. The stock now trades around 30 sen. The rigs were the same as before. Management had simply put cash in shareholders' hands and shown the balance sheet was telling the truth.
The same move is available to Bumi Armada: a formal commitment to return excess cash, keeping a majority for growth and debt repayment and handing the rest back through dividends or buybacks. So far it has not made that commitment.
## 5. You may already own it
This matters even if you never buy a share. PNB, the fund behind the ASB and ASM unit trusts that sit in millions of Malaysian households, owns more than 13% of Bumi Armada. The EPF holds a smaller stake too. If you keep money in ASB, or your monthly EPF contributions have been piling up, a sliver of your savings already rides on whether this company gets re-rated. That exposure is there whether or not you ever buy the stock directly.
## 6. The numbers that would force the issue
Net gearing has fallen to about 0.18 times, down from [2.4 times at the end of 2020](https://www.thestar.com.my/business/business-news/2026/03/03/improved-balance-sheet-net-gearing-propel-bumi-armada), the result of years spent paying down the debt left over from the Kraken era. Operating cash flow of around RM1 billion a year sits against a market value near RM2.1 billion, so the company generates roughly half its own stock-market value in cash annually, from contracts already signed, without needing a single new project. And at 0.36 times book value, you are paying about a third of what the net assets, ships and cash included, are carried at on the balance sheet.
Analysts expect the company's net debt to flip to net cash within a couple of years as the borrowings run off. Some of the more bullish projections floating around, a couple of billion ringgit of net cash and a double-digit dividend yield by 2030, go well beyond anything the company has guided, so treat them as one optimistic scenario rather than a plan. Either way, the balance sheet is the healthiest it has been in years, and the share price is not pricing that in.
## What to actually do with this
You cannot force a company to reward its shareholders, but you can read the situation properly:
- Start with the cash flow statement rather than the profit line. For a business built on finance-lease contracts, operating cash says more about its health than reported earnings do.
- Treat a low price-to-book as a reason to look closer, not a verdict. Bumi Armada is cheap on paper, but that only becomes a re-rating when management commits to returning cash, the way Velesto did.
- Watch for a dividend policy in writing. A formal payout commitment would be the signal that the cash is actually heading to shareholders rather than sitting on the balance sheet.
- Check your own exposure. If you hold ASB or contribute to EPF, you already own a piece of this indirectly, and the same logic applies to other cheap cash generators sitting in those funds.
- If you want to own it directly, understand the business first. A zero-commission broker like [Moomoo](https://finlit.my/mmtv40) or [Webull](https://finlit.my/webullmmtv) is where many Malaysians place their first Bursa trade. Some links here are affiliate links, and Finlit may earn a commission at no extra cost to you.
Bumi Armada's 31% profit drop is really an accounting entry sitting on top of the healthiest balance sheet the company has had in years. The charters are still running and the cash is still landing. The debt from the Kraken era is nearly gone. What is missing is a commitment to hand more of that cash back. Velesto re-rated once management started paying dividends and proved the cash was real, and Bumi Armada could follow the same path. Until it does, the stock can stay cheap for a long time. Pull up the latest cash flow statement on Bursa, read it next to the profit line, and decide which number you trust.
## Frequently asked questions
### Why did Bumi Armada's profit fall 31%?
Bumi Armada's net profit fell around 31% to RM439 million, from RM636 million the year before, mainly because of how its FPSO contracts are accounted for. Charters booked as finance leases recognise more profit in a contract's early years and less as it matures, so reported earnings can decline even when the cash a customer pays each year stays the same. The drop reflected accounting mechanics rather than lost contracts, and the business still generated around RM1 billion in operating cash for the year.
### What is an FPSO and how does Bumi Armada make money?
An FPSO, short for floating production storage and offloading vessel, is a ship-shaped facility that pulls oil from the seabed, processes and stores it, then offloads it to tankers. Bumi Armada owns and operates several FPSOs and leases them to oil companies on long-term charters, usually 10 to 15 years, collecting a steady charter fee for the life of each contract. The model works like a landlord renting out billion-ringgit floating assets.
### Is Bumi Armada undervalued?
Bumi Armada trades at roughly 0.36 times book value, meaning the market prices it at about a third of the net assets it owns, and near RM2.1 billion of market value against operating cash flow of around RM1 billion a year. Whether that is genuinely cheap depends on whether the company starts returning more of its cash to shareholders, since a low price-to-book on its own rarely re-rates a stock without a dividend policy behind it.
### How did Velesto Energy's share price recover?
Velesto Energy rose from an all-time low of about 7.5 sen in July 2022 to around 30 sen after it committed to returning far more cash to shareholders, lifting its dividend payout ratio from under 50% to more than 100% of profit. The re-rating came from dividends that proved the cash flow was real, while the rigs themselves stayed the same. Depressed resource stocks that still generate cash often recover the same way.
### Do EPF and ASB invest in Bumi Armada?
Yes. PNB, which runs the ASB and ASM unit trusts held in millions of Malaysian households, owns more than 13% of Bumi Armada, and the EPF holds a smaller stake of around 2%. Many Malaysians therefore already have indirect exposure to the company through their retirement savings and unit trusts, without owning a single share directly.