Period  3Q15/9M15

Actual vs. Expectations YINSON’s 3Q15 core net profit of RM41.1m brought 9M15 net profit to RM102.2m, making up 80% of our full-year estimates (RM126.7m) and 86% of market consensus (RM119.2m).

 We deem the results as within our expectations as we believe 4Q15 results might be lower on the back of no

Petroleo Nautipa earnings post disposal in Oct 2014.

 Our 3Q15 core net profit forecast is adjusted for the exclusion of forex gain of RM24.8m and gain on disposal of subsidiary and joint venture of RM20.9m.

Dividends  No dividends were declared for the quarter.

Key Results Highlights QoQ, 3Q15 core net profit rose by 10% from RM37.4m in 2Q14, mainly due to cost savings (on operating expenses) post the disposal of Petroleo Nautipa. We highlight that there are still some Petroleo Nautipa earnings in 3Q15 net profits; which might not reoccur in 4Q15 given the sale was completed in Oct-CY14.

 YoY, net profit was up +>100% mainly due to the inclusion of FOP earnings and the inclusion of Lam Son FPSO.

Outlook  Market talk has it that YINSON is close to winning a large FPSO contract soon. This is within the previous guidance that it is bidding for at least 3 projects that could see some results in 2H15.

 We believe the market has factored this potential win, judging from the premium valuations of > 20x FY16 PER that the stock is trading at. Whilst we are positive on this; we highlight that any new project would only yield earnings by end FY16- 17 (due to construction period of 18-24 months). Also we do not rule out cash calls should the new project be a huge one.

 There are plans to divest the non-oil and gas division, but this might only occur from next year onwards.

Change to Forecasts We maintain our net profit forecasts for now pending the analyst briefing later today.

Rating Maintain UNDERPERFORM

Valuation  Whilst we like YINSON for its long-term contracts and ambitious management, we believe that the market has priced-in at least 1-2 contract wins, which would contribute only from CY16.

 Moreover, the stock is now trading at a steep premium to its larger peer Bumi Armada, which trades at CY14-15 PER of 17.4-13.7x tipping the risk-to-rewards balance towards more risks as YINSON embarks on more global contracts.

 Our TP remains unchanged at RM2.31, based on CY15 EPS of 13.6 sen and unchanged PER of 17x. Whilst we have cut the PERs of the oil and gas sector on concerns of the crude oil prices; we have maintained our PER for YINSON due to its ability in winning contracts and the tight share liquidity of the stock.

Risks to Our Call Higher-than-expected contract wins; and better-thanexpected margins on current divisions.

Source: Kenanga