Yinson Holdings Bhd
KUALA LUMPUR: Oil and gas services provider Yinson Holdings Bhd
’s FY1/18 core net profit of RM355m was 12% higher than CIMB Equities Research’s forecast and 3% above consensus, likely due to better-than-expected floating production storage and offloading (FPSO) margins.
The research house raised its sum-of-parts based target price to RM5.13 from RM4.78 after recalibrating our balance sheet cash forecasts upon the release of the full-year results. The last traded price was RM3.76.
“We maintain Add as the recent signing of the Lam Son interim contract should boost earnings and cashflow recognition, while the Layang contract may also be secured,” it said on Friday.
CIMB Research said Yinson’s 4QFY18 core net profit of RM105m was 81% higher on-year, while its full-year core net profit of RM355m was 113% higher on-year.
This strong set of numbers was driven by the eight months’ contribution of the time charter contract of the FPSO JAK to Eni Ghana that commenced from June 3, 2017. This was partly offset by a 47% on-year drop in share of JV earnings.
Yinson’s reported net profits were lower than its core net profit, due to unrealised exchange losses of RM50.7m in 4QFY18 and RM62.4m for FY18, which may have arisen from the impact of the weaker US$ on the carrying value of its US$-denominated fixed assets, offset by translation gains on its US$-denominated borrowings.
“We also classified RM32m of asset impairments as an exceptional item, which were probably in relation to Yinson’s OSV assets,” it said.
Yinson’s share of JV earnings fell 47% in FY18, while it reported share of JV losses of RM3.4m for 2HFY18, for two reasons.
First, the bareboat charter (BBC) rate for the FSO Bien Dong 01 contractually stepped down from Aug 7, 2017, which was the start of the fifth year of its 10-year firm charter period. Also, the charter for the FPSO Lam Son was prematurely terminated on 30 Jun 2017.
While the Lam Son continued to work and costs were incurred, the charterer did not pay any charter hire to the JV company.
The JV company which owns the FPSO Lam Son signed an interim agreement with charterer PTSC on March 26, 2018, backdated to July 1, 2017 and valid until a maximum of end-Dec 2018F, so that a bareboat charter (BBC) rate of US$49,727/day will be paid by PTSC until a final BBC charter contract can be signed (at a likely higher rate).
The interim agreement facilitates the resumption of revenue recognition, which had ceased on June 30, 2017, by the JV company with respect to the Lam Son charter contract.
Yinson’s proposed sale of 26% stake in FPSO JAK for a maximum of US$117m is expected to be concluded before June 30, 2018F.
“This is worth 43 sen a share, of which we assume that 10 sen a share will be paid as special dividends in FY19F.
“For FY18, Yinson declared a DPS of 10 sen, including 2 sen final and 4 sen special DPS.
“Elsewhere, the FPSO CRD BBC contract will most likely be suspended, but our sum-of-parts assumes that Yinson can secure compensation for the costs incurred to purchase the vessel,” said CIMB Research.
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