Yinson steams ahead, fuelled by tanker charters

Yinson is poised to improve earnings momentum

PETALING JAYA: After delivering strong results in the first half of its financial year, Yinson Holdings Bhd is poised to keep or better the earnings momentum in the second half.

The offshore oil and gas services provider has continued to recognise high profits from its charter of tankers.

By end-October, Yinson’s charter of the floating, production, storage, offloading (FPSO) unit called Abigail Joseph is slated to start.Kenanga Research said it would recognise an accounting treatment of a one-off sale revenue of the vessel, not unlike the one back in 4QFY20 from the commencement of FPSO Helang.

For the second quarter ended July 31,2020 (2QFY21), Yinson’s net profit rose 144%, lifted by higher contribution from the engineering, procurement, construction, installation and commission (EPCIC) segment from FPSO Anna Nery, coupled with contribution from the Helang.

“The second half of FY21 is expected to be even stronger, helped by the charter commencement of Abigail-Joseph by the end of October, 2020, ” said Kenanga Research in its report yesterday.

However, stripping-off the EPCIC profits, Yinson’s core earnings came in at around RM95mil, which was somewhat similar to the last quarter.

Cumulatively year-to-date 1HFY21 profits more than doubled year-on-year, due to EPCIC profits from the Anna Nery as well as the Helang, whose charter began in December last year. Stripping off EPCIC profits, 1HFY21 core earnings would have recorded close to RM193mil, said Kenaga Research.

The company announced an interim dividend of 4.0 sen per share, the same as in 1HFY20 and is deemed well within expectations of the market.

Kenanga described the stock as a “defensive play against the current oil industry downturn” and is maintaining an outperform call with a RM7.10 target price.

As for job flows, it sees a relatively low risk of deferments or terminations with the FPSO Parque das Baleias (PdB) being the only yet-to-be-awarded contract.

According to CGS-CIMB Research, Upstream Online reported in July that Petrobras was close to awarding Yinson a contract for PdB and that the contract was to be signed in August. “However, there have been no further developments since then. Yinson claims the contract is still alive as Petrobras has not called for a rebid and or cancelled the contract. However, from Petrobras disclosures, we suspect that PdB is not a priority for Petrobras, ” it said in a report yesterday.

Based on this, the research firm said it was difficult to estimate the timing of the contract award, but if it does happen, could lift the sum-of-part target price to RM9.01, from RM6.56. The research firm also liked the company’s moves to diversify into renewable energy in order to be well placed for a low-carbon global economic future.

In August, Yinson raised its stake in India’s Rising Sun Energy (RSE) to 95% for a total investment of US$14.6mil, which translated to an implied enterprise value over EBITDA multiple of eight times and implied price earnings multiple of 12.6 times, which CGS-CIMB thinks is reasonable. Net profits of RSE may be lifted further if debt refinancing is successful, said the research firm.

Shares of Yinson closed unchanged at RM5.64.

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