Looking forward to uptrend in quarterly profits
? 1QFY23 core net profit made up 18% of our full-year forecast, broadly in line
as future quarters’ profits should pick up as we think EPCIC profits will rise.
? With Yinson’s reported 1QFY23 at 37% of Bloomberg consensus, the street
will likely have to up their numbers significantly, in our view.
? Reiterate Add with reduced SOP-based TP of RM3.18; potential re-rating
catalysts include a possible FPSO contract win in the next six months.
Sequentially strong 44% rise in 1QFY23 core net profit
1QFY1/23 core net profit of RM86m was RM26m higher qoq (+44%), due to: 1) an
RM8m qoq increase in EPCIC profits arising from the maiden contribution from the FPSO
Maria Quiteria (Parque das Baleias) project, that was partially offset by lower EPCIC
profits from the almost-completed FPSO Anna Nery (Marlim-2); 2) stronger US$ vs. the
ringgit that resulted in RM10m more forex gains qoq; 3) the capitalisation of Maria
Quiteria project management costs into the balance sheet as ‘Contract Assets’ from
1QFY23 onwards, whereas in previous quarters those costs were expensed into the P&L
as the project had not yet officially started; 4) certain administrative expenses that were
particularly heavy in 4QFY22 but which did not recur in 1QFY23, partially offset by 5) qoq
reduction in other income that was boosted in 4QFY22 by certain one-off items. Against
the 1QFY22, the 1QFY23 core net profit was 6% higher yoy, due to much of the same
reasons, but partially offset by higher interest expense due to the rise in bank borrowings
taken to fund the construction of the FPSO Anna Nery, as well as the RM1bn sukuk
issued on 7 Dec 2021. Overall, Yinson delivered a good set of results, and the street may
have to start factoring in higher EPCIC contributions, in our view.
Two Angolan FPSO projects may be awarded in the next six months
Yinson expects Eni’s Agogo FPSO project to be awarded soon at a capex of c.US$1.2bn
as commercial bids had already been submitted by Yinson and two competitors. The
same trio had also bid for TotalEnergies’s Cameia FPSO project, which may be awarded
shortly after Agogo. Our analysis suggests that Yinson is likely to win one of the two
projects. Yinson was banking on an Oslo-listing of its FPSO holding company by yearend to help it finance the equity portion of one of the above projects, but if this does not
materialise due to the weak global equity markets currently, Yinson plans to raise
bridging finance from banks, or issue additional sukuk bonds, or sell down stakes in
existing FPSOs to trade buyers; a second rights issue has been ruled out by Yinson.
Quarterly earnings likely to see sequential uptrend
We expect the FPSO Maria Quiteria project, which was 5% completed at end-Apr 2022,
to contribute even higher EPCIC revenues and profits in the coming quarters. Meanwhile,
the FPSO Atlanta project will begin its maiden EPCIC revenue and profit contribution
from 2QFY23F (May-Jul 2022F). The FPSO Anna Nery will sail to Brazil in Jul 2022, be
positioned in the offshore field by late-Oct, and begin contributing leasing profits by lateCY22F or early-CY23F. In short, we expect quarterly earnings to trend higher. Downside
risks: capex cost inflation and overruns; project execution delays.