AmInvestment Research maintains Buy on Yinson

AmInvest Research said Yinson

KUALA LUMPUR: AmInvestment Research is maintaining a Buy on Yinson Holdings (Yinson) with a higher sum-of-parts based fair value of RM3.70 a share, from RM3.60 earlier, which implies an FY18 price-to-earnings (P/E) of 18 times. 

It said on Friday Yinson’s 1HFY17 results, scheduled to be announced next week, is expected to come in above its forecasts but generally within street estimates. 

“Hence, we have raised our FY17F earnings by 11% on higher operational efficiencies in the group’s FPSO (floating production storage and offloading) division. 

“Our FY18F earnings have also been raised by 10% from earlier recognition from FPSO Yinson Genesis by a month, with first oil expected by August 2017 for Eni’s Offshore Cape Three Point project off Ghana,” it said. 

AmInvest Research said Yinson’s 2QFY17 earnings are expected be stronger on-quarter from higher operational efficiencies and a weaker ringgit. 

However, Yinson’s main earnings acceleration will still be from FY18F onwards from the completion of FPSO Yinson Genesis, with sail away expected in January next year.

“If Yinson manages to secure the Ca Rong Do FPSO charter, we estimate an additional 56 sen accretion or 15% to our sum-of-parts (SOP) to RM4.26 a share, assuming an FPSO capex of US$650mil over a 10-year lease, a 49% equity stake and project internal rate of return (IRR) of 15%,”  it said. 

With the Ca Rong Do tender expected to be awarded by the end of the year, the group is also eyeing a much larger FPSO charter – Eni’s ZabaZaba-Etan project in OPL 245 off Nigeria. 

In the event of a termination in the FPSO charter for Knock Allan, the research house expects minimal impact to Yinson’s SOP. 

As the underperforming Olowi field in Nigeria is producing only 1,000 bopd vs. the vessel’s capacity of 35,000 bopd, there is a likelihood that the charter may not continue to its expiry in October 2018. 

If such an event occurs, Yinson expects to receive full termination fees, essentially the discounted cashflows of the bareboat charter. 

“Given Yinson’s locked-in earnings visibility with an order book of US$5.7bil (RM23bil), the stock currently trades at an attractive CY17F PE of 15 times versus over 20 times for Dialog Group and Petronas Gas. 

“We are also positive on the group’s move towards ESG compliance with the addition of four new non-executive directors, which will enhance the stock’s profile among global investors,” it said.