After the removal of one-off items and engineering, procurement, construction, installation and commissioning gains, financial year 2023 (Jan) results for Yinson was positively surprising. This was compounded by better floating production storage and offloading operations and unexpected cost writeback.
“We continue to like the counter for its exponential growth trajectory (41% three-year compounded annual growth rate) backed by maiden contribution from three upcoming vessels while continuing its aggressive ventures into green technology and renewables,” said RHB Research in the recent Malaysia Results Review report.
Note that Yinson Holdings Bhd (Yinson) (259147-A) is a global energy infrastructure and technology company, notable for delivering integrated and technology-enhanced ecosystem across the marine, mobility, energy and digital segments.
“Financial year 2023 core profit of RM338 million (+8% year-on-year) surpassed our full-year estimate at 152% due to unexpected cost writeback and better floating production storage and offloading operations,” said RHB Research, adding that they had stripped off RM398 million engineering, procurement, construction, installation and commissioning earnings in arriving at the core profit.
“We believe Street estimates may not be a good comparison, as other analysts regard Yinson’s engineering, procurement, construction, installation and commissioning earnings as core profit,” said RHB Research.
Quarter four financial year 2023 core earnings spiked 4.7x quarter-on-quarter to RM192 million, thanks to higher floating production storage and offloading operations led by lower tax expenses, higher rate adjustments as well as writeback of cost provision in the previous quarters.
It comes after stripping off a RM70 million net forex losses, RM117 million asset impairment, RM22 million plant, property and equipment disposal gain and RM144 million in engineering, procurement, construction, installation and commissioning gains.
Revenue gained 13% quarter-on-quarter is mainly backed by higher engineering, procurement, construction, installation and commissioning revenue of FPSO Maria Quitéria and Atlanta.
Cumulatively, financial year 2023 core earnings improved by 8% year-on-year, led by stronger floating production storage and offloading operations (led by favourable FX impact and higher rates).
FPSO Anna Nery has started receiving partial charter income since February under a provisional acceptance and is expected to achieve final acceptance in April. Yinson has secured an additional USD50k/day charter rates uplift for this project to cater for higher capital expenditure and operating expenditure.
Both FPSO Maria Quitéria and Atlanta (project Enauta) are on track for conversion, being 46% and 32% completed. Both vessels have slated to achieve first oil by quarter two to quarter three of calender year 2024. Following the signing of the 15+5 years’ charter contract for FPSO Agogo, the final acceptance is guided to delay slightly to early 2026.
Management is eyeing to monetise a partial stake of these projects once they start contributing stable cash flows. Meanwhile, the 485 megawatt wind projects in Brazil progressed into pre-construction activities while the PV projects in Peru and Italy are targeting to achieve final investment decision in the next 12 months.
“We saw an impairment of RM117 million made in quarter four financial year 2023 for the 285 megawatt solar Project Nokh due to an increase in panel prices. We increase financial year 2024 future to 2025 future earnings by 4-7% to better reflect floating production storage and offloading contributions,” said RHB Research.
Financial year 2023 to 2024 future engineering, procurement, construction, installation and commissioning revenue should be maintained, led by contributions from FPSO Maria Quitéria and Atlanta.
“Despite earnings adjustments, our SOP-based trading price is cut slightly to RM3.12 (including a 4% environmental, social, and corporate governance premium) with an update of its net debt position,” said RHB Research.
Downside risks are further contract terminations and weaker-than-expected operating uptime for existing vessels.
