AmWatch - Yinson Holdings : Large FPSO charter around the corner HOLD, 29 Sep 2014

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Yinson Holdings : Large FPSO charter around the corner           HOLD

We downgrade Yinson Holdings (Yinson) to HOLD from BUY with a higher fair value of RM3.67/share (from an earlier RM3.12/share), based on a sum-of-parts (SOP) valuation, which implies an FY16F PE of 29x and EV/EBITD of 15x – a 15% premium to Bumi Armada’s 13x.

Our higher SOP stems from raised capex assumption for the very large FPSO vessel – up from US$700mil to US$1bil, reflective of Bumi Armada’s Block 15/06 Angolan FPSO, which is estimated to cost US$1.5bil. The group had recently signed a MoU with Golden State Petro to buy a Samsung-built 309,000DWT very large crude carrier Ulriken, which was built in 1998. The FPSO is likely earmarked for the Sankofa-Gye Nyame field.

Since Yinson’s accounting policy recognises FPSO earnings only upon commencement of operations, we maintain Yinson’s FY15F-FY17F earnings, with the group’s 1HFY15 net profit of RM61mil largely in line with expectations. On a YoY comparison, the group’s 1HFY15 net profit surged 2.4x YoY from the expansion of its marine operations together with the Lam Son FPSO which achieved first oil on 6 June 2014. The group’s 2QFY15 net profit was flat QoQ at RM31mil, as the full quarter recognition of its 49%-owned Lam Son FPSO was largely offset by the one-off bonus of RM15mil for its early delivery by three weeks.

But in 2HFY15, we expect the group’s core performance to dip slightly from the loss of its contributions. The group remains on the prowl to secure fresh FPSO charters in Africa and Southeast Asia. Management indicated that the result of a large FPSO tender is likely to be revealed by the end of the year while the small-to mid-sized projects would be known next year. 

QUICK TAKE

Plantation Sector : Newsflow for week 22-26 September              NEUTRAL

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