AmInvestment maintains Buy on Yinson on good YTD earnings

KUALA LUMPUR: AmInvestment Bank Research maintained its Buy call on Yinson Holdings with an unchanged fair value of RM4.50 a share.

The research firm said it raised its FY18F earnings by 10% for higher floating production storage and offloading vessel (FPSO) margin assumption as the group's 9MFY18 core net profit of RM275mil came in above expectations.

However, FY19F-FY20F earnings was maintained as the group's sale of a 26% equity stake in its FPSO John Agyekum Kufuour is expected to be completed in March 2018, leading to a moderation in earnings momentum.

Yinson’s 3QFY18 core net profit slid 18% QoQ to RM90mil due to a sharp decline in JV contribution as its bareboat charter for its 49%-owned FPSO PTSC Lam Son was terminated in June this year, coupled with the 1ppt appreciation of the ringgit against the group’s mostly overseas earnings contribution.

"There are still further prospective value enhancements to the group as its 51%-owned FPSO Four Rainbow, currently idle, could be redeployed in the Southeast Asia region.

"Recall that Yinson is in discussions with JX Nippon Oil & Gas Exploration (M) Limited and TH Heavy Engineering to take over the charter for the FPSO, expected to cost less than US$400mil and to be deployed in the Layang field in Block SK10 off Sarawak," AmInvestment said.

The research firm added there a strong likelihood that its 49%-owned joint venture with PetroVietnam Technical Services Corp for the FPSO PTSC Lam Son may be securing a new value-enhancing charter next year after finalising the early termination fee.

There may also be a Hess-related FPSO project in GHana, which cold cost over US1bil.

AmInvestment Research said the stock is currently trading at a bargain CY18F price-earnings of 12x over 20x for Dialog Group and Sapura Energy.