AmInvestment Research retains Buy on Yinson, FV RM3.97

  • Business
  • Tuesday, 20 Jun 2017

Yinson's Lam Son floating production, storage and offloading vessel.

KUALA LUMPUR: AmInvestment Research is maintaining its Buy call on YINSON HOLDINGS with an unchanged sum-of-parts-based fair value of RM3.97 a share, which implies an FY18F price-to-earnings (PE) of 16 times.

It said on Tuesday its FY18F-20F earnings have been fine-tuned even though the group’s 1QFY18 core net profit of RM78mil appears to be above expectations, accounting for 29% of its FY18F forecast and 32% of consensus. As a comparison, 1QFY17 accounted for only 19% of FY17 core net profit. 

The strong 1QFY18 performance was mainly due to the continuation of a lumpy one-off installation job for the group’s wholly-owned floating production storage and offloading vessel (FPSO) John Agyekum Kufuor (JAK), formerly named Yinson Genesis and now deployed at Ghana's Offshore Cape Three Points block. 

AmInvestment Research noted that this marine job has been completed in May this year as first oil has already been achieved 3 months ahead of schedule. Hence, this additional income is unlikely to recur pending the completion of another FPSO. 

With the termination of the charter for the group’s 49% stake in FPSO PTSC Lam Son effectively on June 30 this year, the group’s FY18F-FY19F earnings growth trajectory will be propelled by the maiden contribution from Ghana-bound FPSO JAK.  

“Over the longer term, Yinson’s earnings growth will be further supported by its 49%-owned Ca Rong Do FPSO (Red Emperor)  which is targeted to achieve first oil in September 2019,” it said. 

Commenting on the results, the research house said Yinson’s 1QFY18 revenue was flat on-quarter but surged by 49% on-year to RM172mil from a lumpy marine installation work related to the commissioning of the FPSO JAK. 

With the normalisation of the effective tax rate to 21% in 1QFY18 vs. a positive tax charge in 4QFY17, the group’s core net profit declined 6% on-quarter.  

“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 Asean region. 

“Recall that this is a medium sized vessel with a storage capacity of 600,000 barrels with a production capacity of 40,000 barrels per day and gas compression facilities of 10 mmscfd.

“Given Yinson’s locked-in earnings visibility with an order book of US$4.2bil (25 times FY18F revenue), the stock currently trades at a bargain CY18F price-to-earnings of 11 times vs. over 20 times for Dialog Group and Petronas Gas,” it said.
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