Maybank IB maintains buy on Yinson, raises target price

AmInvestment prefers companies with stable and recurring earnings such as Dialog Group and Yinson

KUALA LUMPUR: Maybank Investment Bank Research has maintained its “buy” call on Yinson Holdings with a higher target price by 6% to RM4.30.

Yinson, with its partner PTSC, has secured the floating production storage and offloading (FPSO) CRD bare-boat charter (from LOI previously) worth US$1bil (10+5-year charter). 

“This job will provide earnings visibility beyond FY20, adding RM45mil to RM80mil net profit per annum in FY21-30 and increase our sum-of-parts-based target price by 6% (24sen/shr) to RM4.30,” Maybank said. 

It said Yinson’s valuations were undemanding vis-à-vis its long-term earnings growth prospect, cashflow strength and for its lean management. 

Additionally, Yinson’s likely admission as a Shariah compliant stock come May is a major positive. 

Based on Maybank’s estimate, the bare-boat charter equates to an average DCR of US$218,000 (on firm) and US$110,000 (on extension). 

“We understand that Yinson has identified FPSO OSX-1 for this job. OSX-1 is a distressed, offhire asset, previously owned by OGX that operated in Brazil and is ready for re-deployment. 

“On a firm charter basis, we estimate this job to add RM45mil to RM80mil per annum to Yinson’s net earnings over FY21-30 (averaging RM58m per annum.) and 24 sen per share to NPV (US$550mil capex, 80:20 debt-equity financing; 7% WACC), based on Yinson’s 49% stake,” Maybank said. 

Meanwhile, the research house estimated that the market has largely priced in the impact of the recent contract termination of FPSO Lam Son.