Yinson
Update on 1QFY1/20 results
Maintain BUY and MYR9.45 SOP-based TP
Results were in line with our estimate despite weaker YoY/QoQ earnings in 1QFY20. Demand for FPSO is exceptionally strong this year and Yinson is well entrenched to ride the wave and generate stronger earnings growth ahead. We expect Yinson to win 2-3 new jobs, which would further extend the weighted average charter duration of its FPSO assets;
currently at 12 years (firm) and 17 years (with extension). Reiterate BUY with an unchanged SOP-based MYR9.45 TP.
Softer YoY earnings expected
Yinson reported a core net profit of MYR47m (-26% QoQ; -25% YoY) in 1QFY20, accounting for 17% of our FY estimate. We deem this to be in line as we expect stronger quarters ahead on maiden contributions from 2 FPSO charters: Helang and Abigail-Joseph from 3QFY20 onwards. The YoY weakness was mainly due to the: (i) absence of earnings from FPSO Allan (MYR10m net profit/qtr from 1 Feb 2019); and (ii) one-off demobilisation costs. This was partially negated by improved associates profits (5x YoY to MYR6m). Recall that Yinson incurred higher opex during the start-up phase of FPSO JAK’s O&M activities a year ago. Meanwhile, its net debt/ gearing level stood at MYR4b / 49% as at end-Apr 2019.
Highly leveraged to ride on the FPSO boom
Our earnings estimates are unchanged. We expect an exciting 2019. Demand for FPSOs is exceptionally strong with a solid order intake (up to 19 jobs) anticipated this year. Yinson, in our view has the capacity, financial resources and project management teams to take on new projects. Yinson could realistically win 2-3 jobs from its 5 firm prospects (Marlim 1 & 2, Parque das Baleias, Greater Pecan and Limbayong).
Securing 3 job wins this year is possible
Our MYR9.45 SOP-based TP is also unchanged, which incorporates 2 job wins (USD1b capex size each, relatively similar to FPSO JAK).That said, we do not rule out Yinson winning up to three jobs given the tightening of market supply and capacity. While Yinson will be a bit stretched in terms of execution capacity, this is not entirely impossible. Securing three jobs, in our view, would likely require a cash call exercise.
Source: https://factsetpdf.maybank-ke.com/PDF/142826_CN__56ca0d5fa838477192bf91dd99c7a020.pdf?
https://klse.i3investor.com/blogs/investsmartway/212509.jsp
