YINSON Holdings Bhd’s recent share price slump just maybe a good accumulation opportunity considering that market analysts are generally still bullish about its stock despite the company reporting lower earnings for its 4Q FY1/2022.
In fact, Maybank IB Research has reiterated its “buy” rating on the world’s sixth largest independent floating production storage and offloading (FPSO) leasing entity with an unchanged sum-of-part (SOP)-based target price of RM11.15, which is 148% higher than its yesterday’s (March 29) closing price of RM4.49.
“(Yinson’s) FY1/2022 core results came in below our expectation on weaker quarter-on-quarter (qoq) performance in 4Q FY1/2022, dragged down by higher: (i) operating expenditure (opex); (ii) finance costs; (iii) taxes; and (iv) losses at an associate,” observed analyst Liaw Thong Jung in a results review.
“Correspondingly, we cut FY1/2023 earnings by 6%. That aside, we remain positive on its prospects.
“Yinson has the best of both worlds: (i) strongest FPSO prospects which it is well-entrenched to capitalise on in this upcycle; and (ii) the clearest carbon reduction footprint strategy to-date.”
Contrary to initial expectation, Yinson reported lower core net profit of RM74 mil (-29% qoq; -47% year-on-year [yoy]) in 4Q FY1/2022 which took its FY1/2022 core net profit to RM411 mil (-13% yoy) which is 91%/ 89% of Maybank IB Research’s/consensus financial year-end estimates.
Meanwhile, CGS-CIMB Research retained Yinson’s “add” call but lowered its SOP-based target price slightly to RM7.91 (from RM8.03 previously) “as Yinson is building the foundations of a multi-year growth story”.
Nevertheless, the research house expects the company’s operating costs to remain elevated in the next year as (i) the FPSO project execution team is being beefed up with more recruits for a potential third project (and new contract win) in 4Q CY2022F; (ii) continuing expensing of its Anna Nery financing costs; (iii) continuing renewable energy (RE) investment costs; and (iv) project execution costs for the Atlanta and Maria Quiteria (MQ) FPSOs may slip into the profit & loss (P&L) account and escape capitalisation.
“However, there may be relief ahead as the Atlanta and MQ projects may cross the 20% completion rate threshold by 2Q FY1/2023F (May-July 2022F) thereby allowing Yinson to book in engineering, procurement, construction, installation & commissioning (EPCIC) revenues and profits from these projects,” opined the research house.
“Also, we expect the Anna Nery charter to start in 4Q CY2023F. Downside risk includes higher-than-expected investment costs in the near term.”
At 9.35am, Yinson was up 16 sen or 3.56% to RM4.65 with 367,000 shares traded, thus valuing the company at RM5.12 bil. – March 30, 2022
