YINSON HOLDINGS BHD

By Maybank Research Rating: Buy Target Price: RM4.20

MAYBANK Research expects Yinson’s second quarter results, which are due this week, to track expectations, with stronger quar- ter-on-quarter (q-o-q) earnings, fuelled by maiden contributions from floating production, storage and offloading vessel John Agyekum Kufuor (FPSO JAK).

“We remain positive on Yinson, for its earnings growth and tender pipeline prospects as well as its cashflow strength. There is no change to our earnings forecasts, and sum of parts-based target price,” the research house said.

“We expect Yinson to deliver a core net profit of RM75mil-RM80mil in the second quarter, which would bring its first half FY18 core earnings to RM138mil-RM143mil (+34%-39% year-on-year), accounting for 52%-54% of our FY18 estimates,” it added.

It said that the quarter on quarter strength would be driven by the maiden earnings contribution from its 100%-owned FPSO JAK, effective June 2017 (2-months impact in the second quarter) and this would be marginally offset by softer associate contribution, owing to weaker profits from 49%owned FPSO Lam Son.

Recall that FPSO Lam Son’s contract was terminated effective Jul 1, 2017 and will be replaced with a supplementary deal with lower day rates.

“Our earnings forecasts are unchanged. Note that our earnings estimates exclude the impact from FPSO Lam Son from Jul 1, 2017. Also, we expect Yinson to finalise the sale of its 26% stake in FPSO JAK for US$117mil by the fourth quarter of FY18,” it said.

“Based on our back-of-envelope valuation, an immediate redeployment for FPSO Lam Son would marginally lift target price by four to ten sen (on a firm four-year charter).

“Apart from that, we do not rule out Yinson securing additional job wins in FY18FY19 (participating in two to three firm tenders),” it added. Overall, with its steady cashflows, Yinson’s ability to constantly pay dividend is enhanced, making it a growth and yield stock in the making, Maybank Research said.