YINSON’s FY22 results came in within our expectation. Although earnings were weaker YoY, its core non-EPCIC business continued to remain stable. The group is still eyeing further growth opportunities in both its FPSO and renewables segments, although a rights issue to raise RM1.1-1.2b is expected to be finalised within the coming weeks. Maintain OP with SoP-TP of RM5.40.

FY22 within our expectations. YINSON’s FY22 core PATAMI of RM411m came in within our expectation at 97% of our estimate. However, the results beat street’s expectations at 110% of consensus estimate, most probably due to their overly conservative assumptions for its EPCIC profits. Nonetheless, we do note that computation of core earnings numbers may differ among analysts. The company also announced a final single tier dividend of 2.0 sen per share, bringing FY22 dividends to a total of 6.0 sen (flat YoY) – also well within expectations.

Weaker earnings. YoY, FY22 core PATAMI saw a 36% reduction. While non-EPCIC core operating profits stayed largely flattish, the poorer results were largely attributable to lower EPCIC contribution following slower progression for the FPSO Anna Nery and absence of outright sale recognition for FPSO Abigail-Joseph upon lease commencement in Oct 2020, as well as higher finance costs following increased borrowings drawdown. Sequentially, 4QFY22 core PATAMI declined 29% QoQ to RM74m - largely due to the higher finance costs as well as the higher tax expenses.

Eyeing growth opportunities; rights issue to come in weeks. The group is still eyeing growth opportunities as it seeks to participate in FPSO bids in Angola, Suriname and Vietnam. The group continues to also be in the forefront of energy transition, with ~1.5GW of renewable energy projects currently in the development and consent stage, as it targets to achieve carbon neutrality by 2030. In order to fund these growths, the group is seeking to raise RM1.1-1.2b via a rights issue, which we expect to be finalised by the coming weeks.

Maintain OUTPERFORM. Post results, we made no changes to our FY23E earnings, while introducing new FY24E numbers. Meanwhile, post model update, our SoP-TP is also lowered to RM5.40 (from RM7.35 previously). We have also widened our share base dilution assumption from the rights issue to 30% (from 15% previously), considering the group’s intention of pricing the issue price at a 25-45% discount, as well the recent share price weakness.

Nonetheless, we still like the name for its capable management team, long-term growth prospects and its ESG angle being well ahead of local oil and gas peers in terms of energy transition.

Risks to our call include: (i) project execution risk, and (ii) weaker- than-expected margins, and (iii) unexpected contract termination.

Source: Kenanga Research - 30 Mar 2022