KUALA LUMPUR: AmInvestment Bank maintains its Buy call on Yinson Holdings
with an unchanged target price of RM3.60, implying a financial year ending Jan 31, 2017 PE of 22x.
It also maintains 2017 to 2018 forecast earnings and introduced 2019 forecast net profit with a growth of 16% underpinned by the full year contribution of the Offshore Cape Three Point floating production storage and offloading (FPSO) charter, which will begin next year.
Excluding exceptional items, Yinson’s core net profit of RM163mil was in line with the research house and consensus’ estimates.
Although it did not declare any final dividend in 4Q16, there will be a special dividend of RM160mil or 15 sen each, from the proposed RM228mil sale of its non oil & gas division to related Liannex Labuan Ltd, expected to be paid in October this year.
Yinson’s 4Q16 revenue and core net profit was slightly higher by 4-5% quarter-on-quarter due to the stronger US dollar impact on the group’s recurring FPSO and FSO charter income.
The group’s earnings are expected to remain flat in 2017 but growth will begin to accelerate from 2018 onwards from the completion of the Ghana-based FPSO Yinson Genesis, with first oil expected by August 2017.
The group is currently in a position of strength given its past prudent approach in negotiating its floating production storage and offloading (FPSO) vessel contracts.
“We understand that there are still many FPSO opportunities despite the current weak sector outlook. This is driven by the need to extract natural gas for electricity generation, especially in Vietnam and West Africa. Hence, in the event of an FPSO termination, Yinson is confident of securing a fresh charter for the vessel,” the research house said in a note on Thursday.
It is also positive on Yinson’s proactive approach in negotiating with current principals to reduce FPSO charter rates for a year in exchange for a longer extension in the firm contract, which could lead to a positive NPV accretion to the group.
Given Yinson’s locked-in earnings visibility, the stock currently trades at an attractive 2017 PE of 17x versus over 20x for Dialog Group and Petronas Gas.
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