- We maintain our BUY call on Yinson Holdings (Yinson) with an unchanged fair value of RM3.12/share (post 1-to-2 share split), based on a sum-of-parts (SOP) valuation, which implies an FY15F PE of 24x and EV/EBITD (Enterprise Value/Earnings Before Interest, Tax & Depreciation) of 14x – comparable with our current valuations for Bumi Armada.

- We maintain Yinson’s FY16F-FY17F earnings but have finetuned FY15F earnings to account for a RM15mil bonus arising from the early delivery of the group’s 49%-owned Lam Son floating production, storage and offloading (FPSO) vessel. This was partly offset by an estimated RM12mil in additional costs to set up the company’s project management team in Singapore.

- Yinson’s 1QFY15 net profit of RM30mil was largely in line with expectations – accounting for 26% of our earlier FY15F net profit of RM117mil and 25% of street’s RM121mil.

- The group’s 1QFY15 results were boosted by a one-off bonus for the early delivery of Yinson’s 49%-owned Lam Son FPSO by three weeks. Excluding this bonus and exceptional items amounting to RM7mil in 4QFY14, Yinson’s 1QFY15 net profit would have fallen by 22% QoQ to RM15mil, mainly due to the RM4mil charge to set up the group’s Singapore project management office.

- On a YoY comparison, the group’s 1QFY15 core net profit was largely unchanged as higher contributions from the marine division was offset by lower trading operations.

- Post-1QFY15F, we expect the group’s quarterly core earnings to significantly accelerate given that the Lam Son

FPSO had achieved first oil on 6 June 2014.

- 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 midsized projects would be known next year.

- Upstream had earlier reported that Yinson together with Tokyo-based Modec and Bumi Armada are currently bidding for an FPSO charter for the Sankofa-Gye Nyame field under the Offshore Cape Three Points (OCTP) licence at offshore Ghana. This Ghana FPSO is expected to cost US$700mil-US$800mil – significantly larger than the US$450mil cost for the recently completed Lam Son FPSO.

- Tenders of smaller FPSO charters in the region are less visible due to shorter contract durations on offer, unattractive charter rates, and domestic political factors.

- Despite outperforming the FBMKLCI by 275% over the past year, valuations are still decent at FY16F EV/EBITDA of 13x compared to Bumi Armada’s 14x.

Source: AmeSecurities