Kenanga downgrades Yinson to ‘underperform’ after 1Q results

-A +A

KUALA LUMPUR (June 30): Kenanga Investment Bank Bhd has downgraded Yinson to “underperform” from “market perform”, with a lower target price (TP) of RM2.31 (from RM2.50) and said that any new contract wins will only contribute from 2016.

The research house said that based on market talk, Yinson is bidding for at least three projects, with management saying that any new wins would be after the first half of 2014.

“Whilst we like Yinson for its long-term contracts and also sound management judgement in making bids, we believe that the market has priced-in at least 1-2 contract wins, which would contribute only from CY16.

“Moreover, the stock is now trading at a steep premium to its larger peer Bumi Armada, which trades at CY14-15 PER of 19.1-16.2x,” wrote Kenanga in a note today.

The research house also said there are plans to divest Yinson’s non-oil and gas divisions which might occur from 2015 onwards.

On Friday, the group reported doubled net profit of RM30.3 million for its first quarter ended April 30, 2014 (1QFY15), from RM15.4 million in the previous year’s same quarter.

Revenue for the quarter rose 29% year-on-year to RM294.1 million from RM228.3 million.

“We deem the earnings as slightly below expectations as we were too aggressive on margins assumptions for the transport, trading and others divisions that saw slightly sluggish growth this quarter,” said Kenanga.