FY18 results came within expectations, recording 50% earnings growth YoY underpinned by maiden FPSO JAK earnings. Special dividend of 4.0 sen/share was a positive surprise. While keeping our estimates pending further details from an analysts’ briefing today, we reiterate our OUTPERFORM call on the stock with unchanged TP of RM4.50/share implying FY19-20E PER of 16.5-18.1x.

Within expectations. At 102%/100% of our/consensus full-year estimates, FY18 core net profit of RM344.4m came within expectations. Our core net profit is adjusted for several items such as: (i) RM12.3m net forex loss, (ii) RM32.8m impairment loss on PPE, (iii) RM5.6m FV loss on investment properties, and (iv) RM4.1m shortfall in insurance claims. Special dividend of 4.0 sen/share and final dividend of 2.0 sen/share were declared, bringing FY18 DPS to 10.0 sen, surpassing our estimate of 4.0 sen.

Weaker QoQ earnings performance. Sequentially, 4Q18 core net profit decreased by 32% QoQ to RM66.2m no thanks to: (i) higher finance cost (+80%), and (ii) lower JV and associate contribution (RM4.4m losses vs RM1.0m profit in 3Q18). YoY, 4Q18 core net profit also fell, by 15% YoY from RM78.1m in 4Q17 due to the abovementioned reasons despite a 39% increase in revenue backed by maiden contribution from FPSO JAK.

FY18 earnings up 50%. Cumulatively, FY18 core earnings have improved by 50% to RM344.4m from RM229.8m in FY17 thanks to: (i) higher contribution from FPSO segment arising from charter income contributed by FPSO JAK since June last year, (ii) additional revenue from shipping services and variation orders, and (iii) stronger USD. The stronger performances offset lower JV and associates contribution (- 47%; cancellation of FPSO Lam Son) and higher finance cost (+2.3x).

Improving outlook. We understand that FPSO outlook is improving as YINSON is currently bidding for multiple projects in countries such as Nigeria, Brazil and Ghana. Thus, we believe YINSON is preparing to secure another big project (c.USD1b capex) post completion of sale of 26% stake in FPSO JAK.

Keep OUTPERFORM. We are keeping our estimates at this juncture pending an analysts’ briefing today. We continue to like YINSON for its: (i) recurring cash flow, and (ii) ability to secure contracts with oil majors amid competitive global FPSO market. All in, we keep OUTPERFORM call on the stock with unchanged SoP-driven TP of RM4.50, implying forward FY19-20E PER of 16.5-18.1x. Risks to our call include: (i) project execution risk, and (ii) weaker-than-expected margins.

Source: Kenanga Research - 30 Mar 2018