RHB Research today reiterated its buy call on Yinson Holdings Bhd, a floating, production, storage and offloading (FPSO & FSO) service provider, with a target price (TP) of RM8.22.
The research house said it is keeping its earnings estimate for Yinson now, pending better guidance on the construction gain recognition on the FPSO Marlim 2 as this is likely to outpace the one-quarter earnings delay from FPSO Abigail-Joseph to second quarter financial year 2020 (2QFY20).
“Note that the construction gain recognition has no impact on our TP given it is merely an accounting treatment without any cash flow impact,” it said in a note.
However, RHB Research said it is not overly concerned about the client’s permitted delay on FPSO Abigail-Joseph as Yinson is not subject to any penalties.
“Assuming maiden earnings contribution from FPSO Abigail-Joseph is delayed for three months, our FY21 earnings are likely to drop by RM35 mil or 9%,” it added.
Meanwhile, the Marlim 2 vessel has been sent to a Chinese shipyard for Phase 1 conversion.
RHB Research said Yinson has yet to finalise the amount of construction gain to be recognised during the conversion period under the finance lease accounting method.
It said if the project were to deliver a US$100 mil construction gain, Yinson could potentially recognise US$20-30 mil in FY21.
“The company, in our view, is still in a good position to win another big FPSO project this year. We see better cost synergies if it is able to seal the PDB project in Brazil,” it added.
It also believes that Yinson is in the midst of finalising the contract terms with Petrobras, with the contract to be awarded earliest by May 2020 given that a six-month gap has been requested by Yinson for better management of two mega projects.
Recently, Upstream reported that the bid validity for the Limbayong project, a joint venture with MISC Bhd, has been extended to April 2020 possibly due to some re-engineering work.
MISC-Yinson are the frontrunners against the other two players: Malaysia’s Sabah International Petroleum Co Ltd and India’s Shapoorji Oil & Gas Pvt Ltd.
At 12.08pm, Yinson’s shares were flat at RM6.20 with 153,300 shares traded. – Jan 31, 2020, Bernama
