9MFY16 core earnings came in at MYR108m, in line with our and consensus estimates at 72% of full-year earnings. Maintain BUY and SOP-based TP of MYR3.71 (28% upside). We continue to like Yinson for its stable business model supported by a strong orderbook from its FPSO segment. We make no changes to our earnings forecasts.

Core earnings of MYR108m. Yinson Holdings (Yinson) reported 9MFY16 (Jan) net profit of MYR175m, up 38.8% YoY, which included a MYR52m impairment of available-for-sale assets and its offshore support vessels as well as an inventory writedown from its legacy trading business. Stripping out the extraordinary items and forex gains, Yinson’s 9MFY16 core profit came in at MYR108m. No dividends were declared.

Outlook. Apart from one offshore support vessel (OSV) that is off charter, Yinson’s three other OSVs are on hire at the moment, complementing its floating production, storage and offloading (FPSO) operations. The contract for FPSO Adoon was recently extended for another three years of operation until 2018. Recall that Yinson’s private placement exercise, which was announced in Jun 2015, has been granted a 6-month extension to complete the other 4% of new shares that have not been placed out yet. Yinson is also in the midst of disposing of its non-oil & gas business, which includes its logistics and trading arm, to the founding family. Upon completion, this would make Yinson a pure FPSO player.

Earnings forecasts. With earnings coming in line with our expectations, we make no changes to our numbers. The key risk to our forecasts would be the unexpected termination of an FPSO contract.

Maintain BUY with an unchanged TP of MYR3.71. We maintain our BUY recommendation and SOP-based TP of MYR3.71. We remain positive on Yinson as its defensive FPSO operations offer long-term earnings visibility supported by stable cash flow until 2031. Yinson is one of the companies under our coverage that is not affected by crude oil price movements, owing to its long-term FPSO charters.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Yinson Holdings Berhad is an investment holding company. The company, through its subsidiaries, provides offshore support services such as trading and logistics to the upstream oil & gas sector. Yinson's business also includes commodity trading.

Recommendation Chart

Source: RHB Research - 29 Dec 2015