The research house said developments on Yinson
KUALA LUMPUR: CIMB Equities Research is retaining its Add for Yinson Holdings Bhd
with a slightly lower target price of RM4.81 as it has deducted the perpetual securities from its sum-of-parts valuation as it had previously treated it as equity.
It said on Monday the oil and gas services provider delivered a 9MFY18 core net profit that made up 93% of its previous full-year forecast, due to lower-than-expected taxes.
Last week, Yinson reported a 9MFY18 core net profit of RM250m, up 97% on-year with the contribution of the FPSO JAK charter contract effective June 4, 2017.
This more than offset the reduction in share of associates’ profits, which dropped as the FPSO Lam Son charter ceased from June 30.
Yinson has not booked any profits from the new charter that took effect from July 1 and will only do so when the contract is officially signed with Vietnam’s PTSC.
CIMB Research said for 3QFY18, Yinson’s core net profit rose 73% on-year, for the same reasons.
To recap, on April 26, 2017, Yinson won a contract to supply an FPSO to Talisman Vietnam for production from the Ca Rong Do field, offshore Vietnam.
Yinson has a 49% interest in the bareboat charter to PTSC, worth US$1bil for the entire 15-year charter (10 firm years and five annual extension options), which is expected to start in September 2019.
Yinson is expected to conclude the purchase of the OSX-1 FPSO from a consortium of bankers in the next few months, upon which the yard conversion process may then commence
The research house also said on Nov 29, Yinson announced that its 30%-owned Yinson Energy was working through the High Court of Malaya to secure a novation of TH Heavy Engineering Bhd’s (THHE) contract with JX Nippon for the supply of an FPSO to the Layang field, offshore Sarawak.
The latter contract was signed on Nov 27, 2014, and the FPSO was supposed to have commenced production from 2QCY16, but THHE subsequently ran into financial difficulties.
JX Nippon originally awarded THHE an eight-year firm bareboat charter contract worth US$372mil, with 10 annual options worth US$457mil, or US$829mil for all 18 years.
“There is some likelihood that Yinson will sign a time charter (TC) contract instead, for the same 18-year duration, hence the total value of the TC contract may exceed US$1bil.
“Yinson likely to buy over 100% interest in FPSO Four Rainbow In 2015, Yinson entered into a 51:49 JV to buy the previously-used FPSO Four Rainbow, to pitch for redeployment opportunities.
“Yinson has a call option to buy over its partner’s 49% stake in the FPSO for €39.6mil, if it secures a contract for the FPSO before Dec 31, 2017F. We believe Yinson will exercise this call option.
"Including the cost of the call option and the consideration paid to THHE for the novation, we estimate that the total capex cost of the FPSO Layang project will be between US$350mil and US$400mil,” it said.
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