Research houses viewed Yinson Holdings Bhd positively with at the back of strong global FSPO demand but earnings maybe dampened by ramp up in FPSO project costs.
RHB Investment Bank (RHB IB) is expectant of the group, saying as it is on track to securing another project once either of the projects reach the tail-end conversion stage as global FPSO demand remains robust.
The group’s 9MFY24 results also came in within expectations, with core earnings growth anchored by stronger FPSO operations.
“We continue to like the company for its exponential growth trajectory (41% 3-year CAGR), backed by the maiden contribution from three upcoming vessels while continuing its aggressive venture into green technology and renewables,” it said in its note today (Dec 15).
It said the downside risks of its call include not being able to win new jobs and contract terminations.
The research house its earnings estimates and its FY24F-25F EPCIC revenue is expected to be maintained, led by contributions from FPSO Maria Quitéria, Agogo and Atlanta.
It also keeps its BUY call and SOP-based TP is kept at RM3.06, 22% upside, including a 2% ESG premium.
RHB IB said Yinson’s 9MFY24 core profit of RM281 million, a (substantial) 92% increase year-on-year (YoY) is deemed within its expectations, at 64% of our full-year estimate as it forecast stronger quarterly earnings in 4QFY24.
“Note, we have stripped off RM553 million EPCIC earnings and the RM112m deferred tax charge in arriving at our core profit. We believe Street estimates may not be a good comparison as other analysts regard Yinson’s EPCIC earnings as core profit,” it said.
However, it said 3QFY24 core earnings dropped 14% QoQ to RM121 million, largely dragged by higher finance costs.
“Cumulatively, core earnings improved by 92% YoY on the back of stronger FPSO operations (Anna Nery earnings and rate escalation for operating FPSOs), masking higher finance costs, and operational overheads, primarily personnel costs.”
“We understand that Yinson is still in discussion with the client on Anna Nery’s standby rate recognition since February and it will take some
time before it can be approved and recognised.
“FPSO Maria Quitéria, Atlanta (project Enauta) and Agogo are on track for conversion, being 82%, 72% and 41% completed,” it said.
RHB IB said Yinson’s management highlighted that global FPSO demand remains robust where Brazil remains the bright spot with an
estimated USD36 billion floating production unit capex over the next five years, followed by the African region (USD17 billion).
“In spite of this, the contractors’ tight capacity could slow down project rollout, and management expects a high level of upfront payment to generally be offered to contractors to reduce balance sheet constraints.
“Given there are three projects in the conversion/construction stage, the company is comfortable to secure another project once either of the projects reach the tail-end conversion stage.
Yinson, it added, is unlikely to pursue the re-deployment project following the exclusivity agreement with BP for the reservation of FPSO Nganhurra expiring by the end-2023.
The 285MWp solar photovoltaic (PV) project at Nokh Solar Park in India has commenced operations in November this year.
However, Kenanga Research is less optimistic of Yinson’s future earnings, as it revise FY24F and FY25F earnings downward by 53% and 35%, respectively, after treating EPCIC profits as non-core earnings.
“Excluding EPCIC, our FY24F net profit assumption is largely maintained, but we cut our FY25F earnings by 15% due to assumed higher overhead costs driven by the ramp up in FPSO project costs,” it said in its Results Note today.
It maintains its OUTPERFORM call but reduces its SoP-TP by 10% to RM3.39 from RM3.79, after a 5% premium given a 4-star ESG rating.
“Yinson’s 9MFY24 profit was within our expectation at 69%. Notably, our non-EPCIC profit forecast for FY25F was at RM400 million. We avoid comparing to consensus profit due to its diverse mix of forecasts, with some projecting EPCIC profits while others do not.
“We anticipate 4QFY24 earnings to remain comparable to 3QFY24, supported by FPSO Anna Nery contribution.”
Post-briefing, Kenanga said that the group currently prioritizes the execution of its upcoming FSPO charters namely FPSO Maria Quiteria, FPSO Atlanta and FPSO Agogo over actively bidding for additional major FPSO projects in the near term.
“The RM34 million impairment pertains to the Nokh solar power plant in India, attributed to a startup delay. The project commenced
operations on Nov 3 and is anticipated to contribute RM10 million EBITDA per quarter.
“(Besides that), no delays are anticipated for the FPSO projects under conversion. FPSO Atlanta and FPSO Maria Quiteria are expected to achieve first oil in 2QFY25.
