Yinson core earnings set to soar

EPCIC jobs to drive growth over next 18 months

“We expect FY24 core EPS to rise another 96% y-o-y, more than doubling from FY22, driven by the start of the FPSO Anna Nery finance lease contribution from early 2023.” CGS-CIMB Research

KUALA LUMPUR: Yinson Holdings Bhd’s core net profits could more-than-double in the next two financial years due to recognition from engineering, procurement, construction, installation and commissioning (EPCIC) jobs.

CGS-CIMB Research said investors will likely be rewarded with strong earnings growth over the next 18 months.

“We forecast core earnings per share (EPS) for the financial year ending Jan 31, 2023 (FY23) to rise 19% year-on-year (y-o-y) due to the recognition of EPCIC profits from the Maria Quiteria (MQ) and Atlanta floating production, storage and offloading (FPSO) projects, which have already started in the first half of FY23.

“We expect FY24 core EPS to rise another 96% y-o-y, more than doubling from FY22, driven by the start of the FPSO Anna Nery

finance lease contribution from early 2023, which is just three to four months away,” it said in a report yesterday.

Additionally, the research house said it had already factored into its forecasts expectations that the FPSO Adoon time-charter contract will eventually be extended for a further five years from October 2022.

“Our FY23 to FY24 core EPS forecasts are 25% to 28% above Bloomberg consensus.

“While we expect FY25 core EPS to soften 8% y-o-y due to the reduction in MQ EPCIC profits, partially offset by the start of the Atlanta charter from mid-2024, FY26 earnings should increase strongly y-o-y from the fullyear contribution from the Atlanta charter and the start of the MQ charter from mid2025.”

CGS-CIMB Research said downside risks include execution challenges that may materialise as Yinson takes on more FPSO projects.

“However, we expect Yinson to handle its projects well,” the research house said.

CGS-CIMB Research said it expects Italian energy firm Eni S.P.A to award the FPSO Agogo project to Yinson, with the group already identified as the preferred bidder for the project offshore Angola.

“We estimate that the Agogo project’s internal rate of return will be around 28%, much higher than the 15% to 16% for the FPSO Anna Nery and FPSO MQ projects for Petrobras.

“This is due to the potential upfront capital expenditure funding from Eni, whereas there was no upfront funding from Petrobras for its projects.”

CGS-CIMB Research estimates the time charter rate for the Agogo to be more than US$750,000 (Rm3.5mil) per day and could be a source of significant cashflow once the FPSO begins production from mid-2026.

“By comparison, the time charter rates for the Anna Nery and MQ projects are only above US$600,000 (Rm2.8mil) per day, since the capital expenditure for both the projects are lower at Us$1bil (Rm4.7bil) each and with longer charter durations of 25 years and 22.5 years, respectively.

“If Yinson secures the Agogo award, the project execution team that was previously managing the already-completed Anna Nery project will manage the Agogo project.”

CGS-CIMB Research is maintaining an “add” call on Yinson with a target price of RM3.34.