Period

4Q16/FY16 Actual vs Expectations

FY16 results came within our expectations with core net profit of RM165.1m but fell below consensus number by 9.6%. We believe it could be due to over estimation of contribution from discontinued operations.

The 4Q16 core net profit forecast is adjusted for: (i) RM1.5m impairment on AFS assets, (ii) RM4.9m unrealised forex gain, and (iii) RM2.0m impairment on PPE.

Stripping off RM11.0m from the discontinued operations, the oil and gas segment actually booked in core net profit of RM154.1m.

Dividends

No dividend was declared as expected.

Key Results Highlights

Sequentially, 4Q16 core net profit declined by 8.5% QoQ to RM50.8m from RM55.5m in 3Q16 mainly due to: (i) decline in OSV marine chartering, and (ii) lower contribution from rental segment (included in discontinued operations) but partially offset by better operational efficiency.

4Q16 core net profit also strengthened by 59.5% YoY due to: (i) stronger performance of USD against MYR, and (ii) reduction in operating cost.

FY16 core net profit stood at RM165.1m, 10.6% stronger than FY15 largely attributable to better forex movements and savings in vessel operating expenses. This in turn was partially offset by overall weaker Transport and Trading divisions, no thanks to weaker overall demand.

Outlook

YINSON is not expected to secure another mega FPSO contract this year to avoid overstressing its balance sheet for CAPEX.

We believe the contract award of mid-size FPSO project in Vietnam will be delayed to 2HCY16 or even later given the current weak operating environment amid low crude oil prices.

The proposed private placement and disposal of its noncore transport and trading business are expected to free up more cash on its balance sheet to prepare the group to take on more FPSO projects in the future to fuel its longterm growth. (Refer to overleaf for more details.)

Change to Forecasts

FY17 CNP revised upwards by 6.9% to RM150.6m and RM140.8m after: (i) the revision of our USD/MYR assumption to RM4.10/USD from RM3.90/USD and (ii) lower interest rate to 5% from 6%.

FY18 CNP of RM234.7m is introduced assuming: (i) lower contribution from FSO Bien Dong as a result of lower charter rate, (ii) 5-month contribution from Yinson Genesis, and (iii) forex assumption of RM4.10/USD.

Rating

Maintain OUTPERFORM

Valuation

SoP-driven TP is revised to RM3.92 from RM4.04 previously. The slight decrease in TP is mainly due to higher than expected net debt position in FY16 partially offset by earnings revision and higher forex assumption.

Risks to Our Call

(i) project execution, and (ii) weaker-than-expected margins.

Source: Kenanga Research - 31 Mar 2016