KUALA LUMPUR (June 20): Yinson Holdings Bhd’s (KL:YINSON) earnings will likely improve ahead thanks to contributions from new vessels and new projects amid strong global demand, analysts said following the oil-and-gas services firm’s latest results.

Shares of Yinson remained largely steady on Thursday as investors continued to digest its results, while analysts quibbled over inclusion of certain profits and flagged complicated balance sheet statements. Still, all 10 research houses covering Yinson have maintained their “buy” call.

Yinson’s reported net profit for the first quarter ended Apr 30, 2024 (1QFY2025) was RM203 million, though core net profit only came up to RM58 million after excluding earnings from the engineering, procurement, construction, installation and commissioning (EPCIC) segment.

“We believe street estimates may not be a good comparison as other analysts regard Yinson’s EPCIC earnings as core profit,” RHB Investment Bank said. Still, the research house expects earnings to improve, driven by maiden earnings from FPSO Maria Quitéria and Atlanta in the latter part of FY2025.

Yinson is expected to take in net income of RM712.25 million, or 26.5 sen per share, for FY2025 compared to RM964 million in FY2024, according to Bloomberg. The consensus' 12-month target price is RM3.65, a whopping 56% potential gain from the current price of RM2.33.

Shares of Yinson have slipped about 7% year-to-date, bucking strong gains of peers in the energy sector. Bursa Malaysia’s Energy Index, which tracks 22 stocks in the sector, have gained more than 19% since the year began.

Oil prices have remained robust amid global geopolitical concerns. Brent, the global benchmark for crude oil, has risen 10% to about US$85 per barrel so far this year.

For UOB Kay Hian, Yinson’s new projects are coming into FY2025 earnings horizon, including two Brazil floating production storage and offloading vessels and the Matarani Solar project at its non-oil-and-gas segment.

However, “accounting distortion is growing alongside its leverage, and both may confuse investors and prolong the stock’s hefty trading discount,” the research house said, flagging “messy and confusing” finance lease disclosure to its true financial and leverage ratios.

Yinson’s measure of leverage in terms of net debt to cash flow was four times, though the ratio would rise to seven times based on the International Financial Reporting Standards disclosure, UOB Kay Hian noted. “For this to work, in our view, Yinson must adopt directional reporting,” the house said.

CGS International highlighted “financial engineering” that bolstered Yinson’s equity returns for its FPSO Anna Nery project after the company upsized its debt for the FPSO Anna Nery this month in order to recoup its equity contribution to the project earlier, and also extended the maturity to 18 years.

The move boosted valuations with Yinson securing front cash while its debt repayment is extended, CGS said.