Promising outlook for Yinson’s FPSO segment
KUCHING: Yinson Holdings Bhd’s (Yinson) floating production, storage, and offloading (FPSO) segment has been viewed favourably by analysts despite the current volatility in oil prices.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) opined: “We believe Yinson is well-positioned to benefit from a gradual pick-up in global demand for FPSOs.”
It explained: “Currently, the group carries an order-book value of around US$4.1 billion, with the bulk of it stemming from FPSO JAK. Outside the order- book, Yinson is currently in exclusive negotiations with First E&P for a contract in Anyala & Madu field in Nigeria.
“The contract, if successful, is expected be a have a seven-year firm period plus an additional eight- year extension option.”
Meanwhile, it noted that Yinson is also actively bidding for three new jobs in Brazil, and one new job in Ghana, all of which involves capital expenditure ( capex) of around US$1 billion each.
“The company is eyeing to win at least one of the new jobs mentioned, with expected award date by 1H19,” it said.
The research team at AmInvestment Bank Bhd (AmInvestment) added that the FPSO jobs in Brazil, West Africa, and the Gulf of Mexico also has a limited pool of contenders with the necessary expertise and financial capability following project scarcities over the last three years.
“Given its low FY20F net debtto-earnings before interest, tax, depreciation, and amortisation (EBITDA) of three-folds which should enable the group to easily secure external project financing, we do not expect any equity raising exercise. With the completion of the two Suezmax-sized FPSOs by the end of next year, Yinson’s project management team is comfortable securing another large project towards early 2019,” the research team said.
For the fourth quarter of FY19 ( 4QFY19), AmInvestment expected the group to record a softer quarter as Yinson benefited from a stronger US dollar in 3QFY19.
“Our FY19F to FY20F earnings project a decline of 17 to 24 per cent due to the full impact of the JAK minority charge together with the expected cessation of the FPSO vessel Knock Allan in April 2019.
“However, Yinson’s FY21F net profit is expected to stage a rebound from the maiden contributions of FPSO Helang as well as Anyala-Madu, notwithstanding protracted contract negotiations,” it projected.
Overall, AmInvestment pegged a ‘buy’ call on the stock while Kenanga Research retained its ‘outperform’ rating as it believed that the group has a promising outlook moving forward given its earnings quality and delivery, stable order- book, and strong contract flow anticipated, which its impact will be substantially visible in FY21.
“Overall, we continue to like Yinson within the FPSO space for being well managed, as proven by its project execution delivery and strong financial footing, coupled with contract- winning ability moving forward,” it added.