Potential mega deals to boost Yinson’s share price

RHB Research says the firm is tendering for other FPSO projects

PETALING JAYA: Despite Yinson Holdings Bhd’s below-expectations results for the first half of the financial year 2020 (FY20), the potential signing of two mega projects in Brazil by year end will be an immediate strong catalyst to Yinson’s share price, said RHB Research.

Yinson registered a net profit of Rm91mil for the first half of FY20, a decline of 32.1% compared with the corresponding period last year.

Yinson’s core net profit of Rm100.8mil, down 22% year-on-year, was 38% and 40% of RHB Research and consensus’ full-year forecast, which were below expectations.

This was mainly due to the delay of FPSO Abigail-joseph to the first quarter of FY21, as requested by the client.

“The delivery date for FPSO Abigail-joseph has been deferred to Q1FY21 from the initial guidance of Q4FY20. “We are not overly concerned on this matter, as Yinson is not subject to any penalties.

“Meanwhile, FPSO Helang is on track for delivery in Q4FY20.

“Both vessels are expected to cumulatively contribute a net profit of about Rm200mil per annum,” said RHB Research.

Meanwhile, core earnings for the first half of FY20 fell 22% year-on-year, largely dragged by weaker contributions from the floating production, storage and offloading (FPSO) business.

This was due to the contract termination of FPSO Allan and a lower share of profit in FPSO John Agyekum Kufuor, post monetisation of its 26% stake in June 2018.

Yinson is currently tendering for several main FPSO projects, namely, Marlim and Parque Das Baleias (PDB) in Brazil, Pecan in Ghana, and Limbayong in Malaysia.

The group is able to stomach two mega projects, with Sumitomo as its partner.

Brazil Energy Insight recently stated that Petrobras could close the deal for the Marlim and PDB FPSO projects in October, with rumours that Yinson will be granted a 20% discount on PDB’S charter rates in addition to a more modest rebate on the Marlim project.

“We believe these two projects are still able to fetch an internal rate of return (IRR) of more than 10%, even after negotiations.

Meanwhile, Upstream reported that the Limbayong project via a joint venture with MISC Bhd has been delayed to early next year due to some design changes.

It was reported that Misc-yinson are the frontrunners against the other two players -Malaysia’s Sabah International Petroleum and India’s Shapoorji Oil & Gas.