• 4QFY19 core earnings fell 8% yoy and 29% qoq to RM58m mainly on higher effective tax rate and opex. Overall, FY19 core earnings fell 18% to RM280m and trailed our estimates at 93% but ahead of consensus’ at 106%.

• The board proposed a final DPS of 2 sen, bringing FY19 DPS declared to 6 sen, implying a 23% payout.

• The odds of securing FPSO Marlim 1 (est. capex c.US$700m) improved after Teekay was disqualified on technical grounds by Petrobras. It now leaves only Yinson and Modec in the race.

• Maintain BUY with an unchanged RM5.10 TP, implying 21.5x FY20F PE. A new project win and income from FPSO Helang and Abigail-Joseph in 2H20F would boost share price, in our view.

Weaker profits on higher effective tax rate and opex

4QFY19 core PATAMI fell 8% yoy and 29% qoq to RM58m mainly due to higher effective tax rate and opex. The latter was possibly due to higher maintenance cost, narrowing EBITDA margin to 70.6% (4QFY18: 76.7%; 3QFY19: 79.3%). This negated the improvement in revenue which was up 8% qoq and 12% yoy to RM288m.

Weaker FY19 on higher interest cost and lower JV profits

On yearly basis, FY19 core earnings fell 18% yoy to RM280m mainly on higher interest expenses as borrowings increased in tandem with new job wins, and lower JV profits. Overall, it trailed our forecast at 93% mainly due to higher-than-expected tax rate.

Bright prospects ahead

We remain positive on its prospects as current orderbook, c.US$4.9bn (as at Feb 2019), comprises of 3 long term charters (ie. Helang, Abigail Joseph and JAK) which offers earnings visibility up to 2037. We expect another project to be secured amidst lesser competition (refer to recent report attached). Yinson is currently competing head-to-head in 3 out of 4 FPSOs projects it tendered (Table 2). This include FPSO Marlim after Teekay was recently disqualified by Petrobras on technical grounds, leaving Yinson and Modec as potential candidates.

Final 2 sen DPS proposed

The board proposed a final interim DPS of 2 sen, subject to approval of shareholders during the AGM. This brings total FY19 DPS declared to 6 sen, as per FY18 and implies payout ratio of 23%.

Maintain BUY with unchanged TP RM5.10

We retain our BUY call with an unchanged TP of RM5.10 which implies 21.5x FY20F PE before it drops to 14.3x FY21F (Table 3). We expect another project win and new earnings streams from the Helang and Abigail-Joseph FPSO in 2H20F to boost share price.

Source: BIMB Securities Research - 28 Mar 2019