Yinson
Update on post results briefing
A great situation to be in; Post results takeaways
The market cycle is in Yinson’s favour to take on 3 projects this year. The indicative returns from these projects are far superior to its existing portfolio, which is not surprising given the robust pipeline of tenders and tight supply situation. While taking on 3 jobs will likely require a cash call exercise, the market will be supportive, in our view, given that the deals are earnings accretive. Our MYR9.45 SOP-based TP is unchanged post briefing, which incorporates two job wins for now. BUY.
Three is a target
Yinson has the capacity to take on up to three large-sized capex FPSO projects (USD1+b each). Historically, it has managed two jobs at a go, albeit on a smaller capex-scale. With two projects set to be delivered in end-FY20, capacity is not an issue, in our view. Managing delivery schedules is paramount. Timeline-wise, results from Brazil’s tenders (Petrobras’ Marlim & Parque das Baleias) will come out first, followed by Ghana’s (Aker’s Greater Pecan). Bagging these jobs augurs well for its operating/ financial visibility, for it would extend the weighted average charter duration of its FPSO assets beyond the current 12 years (firm) and 17 years (plus extension) range.
Returns from new jobs to trump current ones
Quality-wise, the returns from these tenders will likely be higher (mid- teens) vis-à-vis its existing portfolio, which is not a surprise considering the robust tenders pipeline and capacity tightness in the market now. Looking back, its FPSO JAK project yielded a project IRR of 10%-11%. Securing three jobs, in our view will require a cash call exercise. Taking on 2 jobs would elevate its net gearing level to 2x on a pro forma basis.
Ezion deal remains on the cards
The plan to take control of Ezion remains, despite facing: (i) closure delays, on regulatory matters; and (ii) a robust FPSO market. The existing projects – FPSO Helang and Abigail-Joseph – are progressing well. The former is ahead of schedule by a few months and could be delivered by 3QFY1/20; The latter is on track for its 4QFY1/20 roll-out.
Source: https://factsetpdf.maybank-ke.com/PDF/143007_CN__34f7c793e6d44186bace59db3ea5581e.pdf?
https://klse.i3investor.com/blogs/investsmartway/212697.jsp
