• Yinson’s 4QFY18 core earnings grew 5.5% yoy mainly on new contribution from JAK.

• Declared special DPS of 4sen and final DPS of 2sen, bringing FY18 total DPS to 10sen (FY17: 6sen).

• Reiterate BUY with an SOP-derived TP of RM4.30 which implies 12.5x FY19 PE. We like Yinson for its good earnings visibility and relatively low gearing which avails it for future projects.

Higher profit on FPSO JAK contribution

Yinson’s 4QFY18 core earnings grew 5.5% yoy mainly on contribution from FPSO JAK. To recap, FPSO JAK commenced its charter in 3QFY18. Overall, FY18 core earnings grew 33% yoy to RM330.0m and were within ours and consensus estimates at 95% and 96% respectively.

Weaker QoQ performance

Yinson’s 4QFY18 core earnings dropped 41% sequentially on higher opex cost of RM59.9m (3QFY18: RM44.8m), higher finance cost of RM54.4m (3QFY18: RM30.2m) and JV results that turned into loss of RM4.3m from gain of RM0.9m. The weaker JV performance was due to the termination of FPSO Lam Son which had yet to enter into new charter contract despite the vessel continued operating at the Lam Son field. Note that, on 26th March 2018, the company had received the interim charter contract from 1st July 2017 until 31st December 2018 to facilitate the payment before new charter contract is executed.

Limited impact from Ca Rong Do FPSO project halt

While FPSO JAK continued to work with excellent operational uptime, we see limited impact from Ca Rong Do FPSO project setback. Under a worst case scenario, we believe Yinson will be able to recover all costs incurred thus far, as per contract terms.

Declared special dividend

A special DPS of 4sen and final DPS of 2sen was proposed. This brings total declared DPS in FY18 to 10sen (FY17: 6sen). At current market price, that yields about 2.6%.

Maintain forecast, reiterate BUY recommendation; TP RM4.30

Maintain BUY with an SOP-derived TP of RM4.30 which implies 12.5x FY18F PER. Our valuation includes two new FPSO projects i.e. FPSO Layang and another new major project in Africa which is of similar size to FPSO JAK.

Source: BIMB Securities Research - 30 Mar 2018