Analysts positive on Yinson’s prospects
This is despite O&G company’s weaker second quarter
PETALING JAYA: Yinson Holdings Bhd is set to benefit from an improving floating production, storage and offloading (FPSO) market and its stronger balance sheet, which will boost its ability to secure further contracts.
Analysts mostly maintained their “buy,” “outperform” and “hold” calls on Yinson following the group’s second quarter financial year 2019 (2Q19) results, despite its net profit falling 11.9% year-on-year to RM73.67mil during the period.
The offshore support services company had posted lower earnings due to higher financing costs and reduced contributions from its joint ventures and associates.
Kenanga Research said it continues to like Yinson despite the results disappointment because the company is well managed, as proven by its project execution delivery and strong financial footing, coupled with its ability to win contracts moving forward.
It added that Yinson has far superior financials compared to its closest peer Bumi Armada Bhd, given its better-managed debts and project financing approach.
“Yinson is well positioned to benefit from an improving FPSO market, underpinned by strengthening oil prices.
“Its contract winning ability is also further enhanced by an improved balance sheet following the disposal of its 26% stake in FPSO JAK,” it said, while maintaining its outperform call on the counter.
UOB Kay Hian Research said Yinson’s premium valuation was justified by its track record for excellent deliveries.
The research house, which maintained its buy call on the counter, said it continued to like the group’s long-term potential, being a major beneficiary of FPSO project bids globally, and potential opportunities with its strategic partners.
“We believe the near-term earnings decline is well guided by management, and hence the stock sentiment will focus on the longer-term earnings re-rating and Yinson further securing more FPSO contract wins.
“The stock remains a solid choice for longterm investors on its proven contract replenishment and capital management ability,” it said.
Maybank Investment Bank Research, which also retained its buy call, noted that Yinson’s cash position has risen to RM1.1bil, while net debt/gearing level had fallen to RM1.6bil following the FPSO JAK stake sale and issuance of a RM950mil sukuk.
It said this allowed Yinson to gear up, as it pursues new FPSO prospects.
“With five firm tenders in the pipeline, we estimate Yinson’s net gearing to rise to 1x should it win one job worth US$1bil in capex. We posit that this is an opportune window to accumulate,” it added.