Period  4Q14/FY14

Actual vs. Expectations YINSON’s 4Q14 core net profit of RM18.6m brought the FY14 core net profit to RM60.9m. The FY14 net profit comes in within our expectations of our full-year estimate of RM61.4m but higher than the RM55.4m consensus estimates.

 Our full-year FY14 core net profit forecast excludes (i) oneoff-net-gains related to the FOP acquisition (RM27.5m); (ii) forex gain of RM4.2m; (iii) impairments for available-for-sale investments (for Lion shares owned) of RM19.2m; and (iv) impairment of receivables of RM5.8m.

Dividends  No dividends were declared for the quarter.

Key Results Highlights QoQ, the 4Q14 core net profit by 23.8% (from RM15.0m in 3Q14) due mainly to better performance by all divisions.

 YoY, 4Q14 core net profit is higher by 30.8% (from RM14.2m in 4Q13) due to significant turnaround in the associate and JV line with the maiden FSO earnings being recognised this year.

 YTD YoY, the core net profit was up 38.5%, largely due to better top-line earnings attributable to the marine division and FSO earnings that kick-started this year.

Outlook  YINSON is currently bidding for contracts in West Africa and Vietnam. We gather from market talk that there are at least three projects that fit the bill for Yinson. Management guides that any new wins would likely be after 1HCY14.

 YINSON will continue to focus on the floating production operations, given that they have the requisite track record and it also enhances their geographical presence, which is already expanded by the FOP acquisition.

 In our view, the possibility of another floating production win is high, but these projects would only yield earnings by end FY16-17 (due to a construction period of 18-24 months).

 The company has proposed a rights issuance and share split that is yet to be completed (illustrated new no. of shares is purportedly 1.03b.)

Change to Forecasts    We have fine-tuned some assumptions for FY15, which leads to a marginal 2.1% upside to net profit forecasts.

 We also introduce our FY16 net profit forecast of RM145.5m, which features full-year contributions from the

FPSO on top of the FSO and FOP earnings that kick-started in Jan-14.

Rating Maintain MARKET PERFORM

Valuation  We roll-forward our valuation base year to CY15.

 Based on CY15 EPS of 55.8 sen and a higher PER of 17x (from 15x), our new target price is RM9.50 (from RM7.32 based on FY14 EPS previously).

 Our new PER is 2x higher to credit YINSON for the potential contract it might win this year; and its tight shares liquidity.

 Assuming a 1-for-1 rights issuance and share split; our TP on “ex-all” basis could be pegged at RM2.50.

Risks to Our Call (i) Higher-than-expected capex requirements could see further rise in gearing.

 (ii) Contractual and project execution risks in new projects.

Source: Kenanga