No surprises to 3QFY20 results. Anticipating a stronger FY21E earnings given the commencement of FPSO Helang and FPSO Abigail-Joseph. YINSON is still in contention of several project tenders after recently clinching a contract award for the Marlim FPSO in Brazil. Materialisation of any further contract win could serve as a catalyst. Maintain OUTPERFORM and SoP-TP of RM7.75.

9MFY20 results within expectations. YINSON posted 9MFY20 core net profit of RM149.9m (arrived after stripping-off non-core items e.g. forex, impairments etc), coming in within expectations at 67% of ours and consensus earnings forecasts, in anticipation of a stronger 4QFY20 given the recent commencement of FPSO Helang on 6 Dec 2019. No dividends were announced, as expected.

Expectedly weaker set of earnings. YoY, earnings were weaker (both cumulatively 9MFY20 and 3QFY20) due to the cessation of FPSO Allan’s charter contract in end-FY19. The FPSO is currently undergoing conversion works, and is set to be redeployed as FPSO Abigail-Joseph at the Anyala and Madu fields, Nigeria, in 1QFY21. Meanwhile sequentially, results were also slightly poorer on the back of higher finance costs and poorer JV contributions.

Stronger FY21E; contract wins still in pipelines. Moving forward, expect sizable earnings jump in FY21E given the commencement of (i) FPSO Helang on 6 Dec 2019, and (ii) FPSO Abigail-Joseph in 1QFY21. Meanwhile, after recently clinching a Marlim FPSO contract, YINSON is still in close contention for (i) Aker Energy’s Pecan FPSO off Ghana, (ii) Parque das Baleias FPSO in Brazil, and (iii) Limbayong FPSO, in partnership with MISC. Materialisation of any of these contract award could provide some catalyst to the counter.

Maintain OUTPERFORM, with unchanged SoP-TP of RM7.75 – implying 23x PER on FY21E, which is at +2SD from its 5-year mean. No changes to our FY20/21E numbers post-results. Our valuations have already priced-in one more new contract wins, based on assumptions of (i) 15% IRR, and (ii) 8% discounting rate.

Risks to our call include: (i) project execution risk, and (ii) weaker-thanexpected margins, (iii) termination of contracts, and (iv) failure to land new contracts.

Source: Kenanga Research - 19 Dec 2019