Period  4Q15/FY15

Actual vs. Expectations  The 4Q15 core net profit (CNP) of RM37.4m brought FY15 net profit to RM126.6m, which is within our expectation (RM129.0m) but missed consensus forecast by 11.2%.

 Our 4Q15 core net profit forecast is adjusted for: (i) forex gain of RM55.7m, and (ii) net fair value adjustment on derivatives of RM30.4m.

Dividends  1.5 sen final dividend is proposed for the quarter, which is a surprise to us as we did not forecast any dividend payout for FY15.

Key Results Highlights  4Q15 CNP dipped by 11.4% QoQ mainly underpinned by weaker earnings from Marine division despite flattish QoQ change in its top line, possibly due to timing differences in costing. Therefore, resulting in weaker operating margin for the division in the quarter.

 Core profit surged by 278.8% YoY in 4Q15, predominantly due to the inclusion of contribution from Yinson Production AS (YPAS), subsidiaries consisting of FPSO Knock Adoon and Knock Allen, which were acquired by the group in Dec 2013. In addition, higher share of FPSO contribution in the marine division also resulted in higher overall group operating margin. (4Q15: 39.7%, 4Q14:13.7%)

 CNP surged significantly by 108.0% in FY15 YoY due to: (i) the inclusion of earnings from newly acquired YPAS, and (ii) higher margin in marine segment driven by higher FPSO contribution. This was partially offset by weaker transport division caused by lower demand for transport services during the year.

Outlook  YINSON does not expect to secure another major FPSO contract this year to avoid overstressing its balance sheet for CAPEX.

 There is a potential opportunity for YINSON in Ghana as ENI has also signed an agreement with the government to produce non-associated gas in the Gye Nyame field nearby.

 The estimated CAPEX required by YINSON is c.USD120m- 200m for the gas producing project, but the nature of the potential contract remains uncertain for now pending further discussions with ENI. We reckon a similar offshore production unit will be required for the project to channel the produced gas to the underutilized power plants in Ghana.

 This could be the next positive catalyst to the group but it could only be awarded possibly in end-2016.

 YINSON also does not discount the possibility of securing another mid-size FPSO contract in end-2016.

Change to Forecasts  We maintain our earnings forecasts for now, pending the analysts’ briefing later today.

Rating Maintain OUTPERFORM

Valuation  SoP-driven TP is maintained at RM3.81.

Risks to Our Call  (i) project execution, and (ii) weaker-than-expected margins.
 

Source: Kenanga