Maintain BUY, TP raised to MYR2.88. Yinson’s 4QFY1/13 core net profit of MYR9m (+10.5% QoQ, +40.7% YoY) took full year earnings to MYR38.4m (+40.5% YoY), in line with our expectations. While our forecasts are unchanged, our sum-of-parts (SOP) based TP to 2.88 (+13.4%) after rolling over valuations and lowering the Bein Dong FSO’s WACC discount rate to 7.0% from 8.3%, considering that the FSO has been completed and poses minimal construction and delay risks. We reiterate our BUY call; our new MYR2.88 TP equates to FY1/14 and FY1/15 PERs of 9.8/6.0x respectively

Several one-off items in 4Q. Yinson’s 4QFY1/13 net profit dropped 42.1% QoQ and 26.2% YoY due to a net EI loss of MYR4.5m arising from: (i) a MYR8.2m write-off in trading receivables related to a scrap steel customer facing financial difficulty and is unable to settle the debts in full, (ii) MYR3.1m gain from the revaluation of its 40% stake in Phu My port (+MYR3.1m) and (iii) MYR0.6m disposal gains of equipment. Stripping these off, Yinson’s core net profit was MYR9.4m (+10.5% QoQ, +40.7% YoY). No dividend was declared in 4Q as we have expected but we think a 2.5sen will be declared closer to its AGM.

Marine operations drove operating earnings. 4QFY1/13 group EBIT of MYR7.8m was dominated by marine EBIT (MYR5.6m) followed by transport (MYR2.3m). Despite lower marine revenue in 4Q (-20.1% QoQ), due to the seasonal drop in marine brokerage income, EBIT held steady (+0.2% QoQ), anchored by its three existing offshore supply vessels (OSV) and partial contribution (1-2months) from a recently delivered fourth AHTS (8,000bhp), resulting in a +6.8-ppts QoQ margin expansion. Ex-EI, trading division reported lower EBIT of MYR2.1m (- 73.8% QoQ) in 4Q as trading seasonally slowed down in 4Q.

Steadier earnings going forward. We retain our FY1/14-15 earnings forecasts, introducing FY1/16 forecast. Valuations are undemanding as Yinson trades at 8.7x FY1/14 PER on 38% 3-year forward earnings CAGR. We estimate 73%/78% of Yinson’s pretax profits in FY1/14/15 will come from the O&G segment (OSVs, FSO and FPSO), which are anchored by medium to long-term contracts, greatly reducing the volatility seen this quarter. The successful execution of its FSO and FPSO projects will solidify its reputation and track record in the market.

Source: Maybank Research - 29 Mar 2013