Yinson shares rise on firm 2Q earnings

Yinson shares rise on firm 2Q earnings
-A +A

KUALA LUMPUR (Sept 29): Shares in Yinson Holdings Bhd rose to be among the top gainers on Bursa Malaysia in the morning trading session today after reporting firm financial results for the second quarter ended July 31, 2020 (2QFY21). 

At 10.11am, Yinson was up 2.13% or 12 sen at RM5.76, bringing its market value to RM6.32 billion. Some 117,900 shares changed hands, much lower than its 200-day average volume of 1.77 million. 

Yesterday, Yinson reported that its net profit jumped 144% to RM100.36 million for 2QFY21, from RM41.14 million a year earlier, as the group’s earnings were lifted by a greater contribution from its engineering, procurement, construction, installation and commission (EPCIC) segment.

Its quarterly revenue soared to RM995.58 million from RM213.44 million a year ago. 

According to CGS-CIMB Research, Yinson’s core net profit of RM118 million for the first half ended July 31, 2020 (1HFY21) was 39% of its FY21 forecast, which was below expectations due to a delay in the start of the Abigail-Joseph (AJ) charter.

“The delay in the set-up of subsea infrastructure at the Anyala and Madu fields offshore Nigeria and the Covid-19 pandemic caused the commencement of the FPSO (floating, production, storage and offloading) AJ charter to be pushed back by almost one year. 

“However, there is light at the end of the tunnel, and Yinson is confident that first oil can be achieved next month; our earnings model assumes a Nov 1 start.

"In the meantime, Yinson has negotiated with the client for delay compensation, of which RM19.6 million was booked into 2QFY21 P&L (profit and loss),” said CGS-CIMB Research analyst Raymond Yap in a note today. 

On Petrobras' FPSO Parque das Baleias (PDB) contract, Yinson claimed that the contract is still alive as Petrobras has not called for a rebid or cancelled it. 

“However, from Petrobras' disclosures, we suspect that PDB is not a priority for them. In our view, it is difficult to estimate the timing of the contract award if any,” said Yap. 

However, Yap reiterated an "add" call for Yinson, with a lower target price (TP) of RM6.56 (from RM6.94), as he expects Yinson’s earnings to lift off this year onwards on the Helang and AJ charters as well as EPCIC profit from FPSO Marlim 2.

“In August, Yinson raised its stake in Rising Sun Energy (RSE) to 95% with a total investment of US$14.6 million (RM60.8 million), with an implied EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation and amortisation) multiple of eight times and an implied P/E (price-earnings) multiple of 12.6 times, which we think are reasonable.

“We like Yinson’s move to diversify into renewable energy in order to be well placed for a low-carbon global economic future,” added Yap.

Meanwhile, AmInvestment Bank Bhd maintained its "buy" recommendation for the group, with an unchanged sum-of-the-parts-based fair value (FV) of RM7.20 per share, which implies a FY22 forecast (F) PE multiple of 18 times.

“While our FV is unchanged, we raised our FY21F-23F earnings by 13%-17% largely due to accelerated profit recognition from the charter of Petrobras’ FPSO vessel Anna Nery (formerly known as Marlim 2). 

“This stems from progressive recognition of EPCIC profit until project completion under finance lease accounting adoption,” said analyst Alex Goh in a note today. 

He added: “Given the group’s net debt/Ebitda of three times, we expect it to proceed with a rights issue upon successfully securing the PDB charter.

"Assuming a RM700 million rights issue to fund the substantive capex (capital expenditure) and a 40% discount to the current market price, we estimate that the theoretical ex-SOP price could drop to a still compelling and value-accretive RM7.80/share."

Besides, Goh said Yinson currently trades at an attractive FY22F PE multiple of 13 times, underpinned by a strong outstanding order book of RM42 billion. 

“This is at a 43% discount to its five-year peak of 23 times in February this year,” he said. 

Surin Murugiah