• 1QFY20 core earnings fell 17% yoy to RM51m mainly on higher minority charges from FPSO JAK. Overall, it came largely within ours and consensus’ estimate at 20%.

• On QoQ basis, core profits fell 13% due to the expiry of FPSO Allan hire charter.

• Chances are high to secure maiden project in Brazil as it was the sole bidder for both projects it tendered; the other competitors withdrew/disqualified due to financial constraint.

• Despite stock price soared over 30%, we believe it has not reflect the full potential of 2 new job wins. We put our recommendation and TP under review pending the analyst briefing later today.

Weaker profits on higher minority charges

1QFY20 core PATAMI fell 17% yoy to RM51m mainly due to higher minority charges from the disposal of 26% in FPSO JAK effective 2QFY19. Revenue fell 11% yoy to RM209m following the end of charter for FPSO Allan in Jan 2019. However, it was partially offset by lower depreciation charges and higher income contribution from FPSO JAK O&M JV company. Overall, 1QFY20 results were within ours’ and consensus forecast at 20%.

Weaker QoQ on expiry of FPSO Allan

On QoQ basis, core earnings fell 13% due to the expiry of FPSO Allan charter. The vessel is currently under refurbishment works and would be redeployed for Anyala & Madu field off Nigeria. The vessel will be renamed as FPSO Abigail-Joseph with charter is expected to commence in 4QFY20.

Fundamental is stronger with maiden project in Brazil

While earnings are likely to be weak in 1HFY20, we expect earnings to pick up in 2HFY20 as FPSO Abigail-Joseph and FPSO Helang will commence respective charter during the period. Meanwhile, Yinson currently has 3 active bids in Brazil and Ghana with total capex close to US$3bn (Table 2). The Brazil prospect looks promising after Yinson was the sole bidder in both Marlim FPSO and Parque das Baleias FPSO projects, potentially adding at least 2 new job wins to its orderbook.

Recommendation and TP under review

The stock price soared over 30% as the market anticipates Yinson to clinch Marlim FPSO project in Brazil. Nonetheless, at current price, we think it has not fully reflect the potential of 2 new job wins, possibly discounted by concern on its financial capacity and execution risk to undertake both projects simultaneously. We put our recommendation and TP under review pending analyst briefing later today.

Source: BIMB Securities Research - 27 Jun 2019