Yinson beats expectations, more room for growth ahead

KUCHING: Yinson Holdings Bhd’s (Yinson) earnings for the second quarter of the financial year 2018 (2QFY18) exceeded expectations and analysts believe that there is still more room for growth for the company, driven by its strategic plans and ability to secure international jobs.

Yinson’s 1HFY18 results generally came in above analysts’ and consensus’ expectations, on stronger-than-expected contributions from the sale of a 26 per cent equity stake in its wholly-owned floating production storage and offloading vessel (FPSO) John Agyekum Kufuor (JAK).

“Yinson’s 2QFY18 core net profit surged 41 per cent quarter-onquarter (q-o-q) to RM110 million due to the commencement of the JAK FPSO, formerly named Yinson Genesis, and deployed currently at Ghana’s Offshore Cape Three Points block.

“This also drove the group’s earnings before interest, tax, depreciation and amortisation (EBITDA) margin from 59 per cent in 1QFY18 to 85 per cent in 2QFY18,” the research arm of AmInvestment Bank Bhd (AmInvestment) said, noting that with Eni’s final acceptance in early June this year of the JAK FPSO, there was a two-month contribution from this project, which achieved first oil in May 2017, to boost 2QFY18 earnings.

On its outlook, while the JAK FPSO would continue to drive earnings momentum in the subsequent quarter, the research team noted that this would be partly offset by the termination of the charter for the group’s 49 per cent stake in FPSO PTSC Lam Son effectively on June 30 this year.

“The one-month impact caused 2QFY18 associate contribution to drop 27 per cent q-o-q and 19 per cent year-on-year (y-oy-) to RM20 million,” it explained.

Over the longer term, however, it pointed out that Yinson’s earnings growth could be further supported by its 49 per cent-owned Ca Rong Do (Red Emperor) FPSO, which is targeted to achieve its first oil in September 2019.

“There are still further prospective value enhancements to the group as its 51 per cent-owned FPSO Four Rainbow, currently idle, could be redeployed in the Southeast Asian region,” Am- Investment highlighted, noting 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.

Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) favoured the group for its secured long-term FPSO contracts, which provides recurring cash flow, and ability to secure contracts with oil majors amid competitive global FPSO market.

It also noted that with the intention to redeploy FPSO PTSC Lamson, Petrovietnam is currently in the midst of discussing new charter contract with PTSC AP while firming up the compensation amount.