Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with an unchanged sum-of-parts-based (SOP) fair value of RM5.53/share, which implies an FY21F PE of 14x.

• Yinson’s FY19F-FY21F earnings are maintained as its 1HFY19 core net profit of RM128mil came in within expectations, accounting for 45% of our and street’s FY19 net profit vs. 49% for 1HFY18 to FY18.

• Our forecasts and fair value are likely to be unchanged after Yinson’s analyst briefing later today. The group declared an interim dividend of 4 sen, which is in line with expectations as it represents half of our FY19F DPS.

• We expect a softer 2HFY19 as the full minority charge from the sale of a 26% stake in the John Agyekum Kufuor (JAK) floating production, storage and offloading (FPSO) vessel on 6 June this year was not fully accounted for in 2QFY19.

• Hence, our FY19F-FY20F earnings project a decline of 17%- 24% due to the full impact of the JAK minority charge together with the expected cessation of the FPSO Knock Allan in April 2019. However, Yinson’s FY21F net profit is expected to stage a rebound from the maiden contributions of the FPSOs Helang and Anyala-Madu.

• Yinson’s 2QFY19 core net profit rose 5% QoQ to RM66mil largely due to the depreciation of the ringgit against the group’s USD revenues, lower administrative expenses and higher associate contributions.

• On a YoY comparison, Yinson’s core net profit decreased 29% mainly due to the termination of the group’s 49%-owned Lam Son FPSO charter. The vessel is still being deployed in the field on an interim charter until 31 December 2018.

• The group remains optimistic of securing another US$1bil FPSO early next year with multiple rollouts of projects in Brazil, West Africa and Gulf of Mexico (see Exhibit 4) amidst a limited pool of contenders with the necessary expertise and financial capability following project scarcities over the past 3 years.

• Given its low FY20F net debt-to-EBITDA of 3x which should enable the group to easily secure external project financing, we do not expect any equity raising exercise. With the completion of the 2 Suezmax-sized FPSOs by the end of next year, Yinson’s project management team is comfortable securing another large project towards early 2019.

• Underpinned with locked-in earnings visibility from an outstanding order book of US$4.3bil (25x FY18F revenue), the stock currently trades at a bargain FY19F PE of 17x vs. over 20x for Dialog Group and Sapura Energy.

Source: AmInvest Research - 25 Sept 2018