ON FIRM GROUND
O&G player to expand shareholders fund, leverage on strong business partnerships
YINSON Holdings Bhd, with order book and cash levels at a new high, will continue to strengthen its balance sheet so as to remain competitive in the current low oil price environment. The company
is now a favourite among analysts with five “buy” calls.
THE oil and gas (O&G) industry is not out of the woods yet as there are different pressures coming in, said analysts. For one, a weak balance sheet will bleed the players dry. Firms that remained standing would be those that had cash, they said.
Yinson Holdings Bhd, a favourite of analysts, said it would continue to strengthen its balance sheet to stand out from its peers even though it had a strong cash position.
“With the low oil price environment, the financial stability of (some of) our peers has gone down significantly compared to ours, which has increased.
“Our order book and cash level are at a new high,” said group chief executive officer Lim Chern Yuan.
“For financial year 2018, we will focus on strengthening the group’s balance sheet by expanding our shareholders fund, leveraging on existing strong business partnerships and developing new ones. We are optimistic that we will rise up and meet the headwinds in the O&G sector,” he said.
Yinson is disposing of its 26 per cent stake in a Ghana-based floating production, storage and offloading unit to a consortium of Japanese companies, which analysts believe would beef up its cash position.
Yinson has five “buy” calls and only one “hold” call, with relatively high target price recommended by analysts.
Maybank Investment Bank and KAF Seagroatt and Campbell had the highest target price for Yinson at RM4.20.
MIDF Research O&G analyst Aaron Tan said the industry was generally still weak on the upstream although downstream was stable.
“With the weak oil prices, if companies are unable to pay their debts, their balance sheet will be affected. But thus far, they have been able to do so,” he told NST Business.
For companies with high debt levels, such as Alam Maritim Resources Bhd, it could be tougher down the road, but Alam Maritim managing director and chief executive officer Datuk Azmi Ahmad remains optimistic.
“Things are looking better although a bit slow. Oil majors are coming out with big tenders and new contracts will be dished out soon.
“Apart from local tenders, we are also actively tendering outside Malaysia, namely in the Gulf areas, Brunei and Thailand.
“The slowdown in the O&G industry has taken its toll on many companies and Alam Maritim is not spared. We need to sustain ourselves to be relevant when the next wave comes,” he said.
The company was hit by a ratings downgrade by Malaysian Rating Corp.
The affected debt notes were the RM500 million sukuk ijarah medium-term notes, which had been lowered to “BB+IS” from “BBB+IS”.
“I am also optimistic about getting out of debt. That is why we seek help from Corporate Debt Restructuring Committee. We are trying to restructure more than RM500 million debt,” said Azmi.