Yinson Holdings Berhad (Yinson) is actively seeking out new contracts as current ones are approaching the tail-end of the conversion stage, aided by robust global demand for FPSO units that has shaped a vendor's market, according to stock analysts. (FPSO: Floating Production Storage and Offloading)
Kenanga has awarded an OUTPERFORM rating for Yinson and increased the target price by 11% to RM3.55, citing further earnings prospects towards the end of financial year 2024/25.
RHB, on the other hand, has maintained its BUY call but has revised downward the target price from RM3.32 to 3.29, echoing Kenanga's positive revenue outlook for Yinson in the second half of financial year 2024/25.
As at 3:22pm on Tuesday (October 1), Yinson's stock traded at RM2.64. (Stock updates from )
The first-half results (1HFY2024/25) for Yinson came in within expectation. The six-month financial period covering 1 February 2023 through 31 July 2024 was lifted largely by the commencement and full contribution of FPSO unit Anna Nery in May 2023. This is further anchored by lower operational overheads and better contribution from both the green technology and renewable energy units.
The core net profit of over RM220m (Kenanga: RM225m; RHB: RM230m), adjusted for finance cost (classified as corporate debt) and impairment reversal, came within market expectation at around 48%.
Revenue declined by 29% year-on-year (YoY) in the first six months of the financial year due to lower EPCIC revenue recognised from FPSOs such as Maria Quiteria, stemming from slower work progress.
The group is expected to get further earnings boost in Q4FY2024/25, driven mainly by Maria Quitéria and Atlanta (the Enauta project) which will start to turn in maiden earnings in October and December 2024.
Meanwhile, FPSO Agogo is on track for conversion, being 75% completed, and its first oil scheduled for Q4FY2025/26.
The term first oil refers to the moment when a new oil field or well begins producing oil for the first time. This is a significant milestone marking the transition from the development and construction phase to production. It is the point at which the FPSO and oil field become fully operational, thus starting to generate revenue.
Though Yinson's current contracts are approaching the tail-end of the conversion stage, the company can expect to benefit from the still robust global FPSO demand owing to its active bidding for new projects.
Analysts are optimistic that the ongoing monetisation of the FPSO projects will bring in ample cash to fund new projects, sparing Yinson from resorting to equity fund-raising.
Also, Yinson remains committed to paying quarterly dividends, with a guidance of 5-year 30% CAGR (Compound Annual Growth Rate). This is premised on strong earnings and cash flow, with EBITDA (Earnings Before Interest Taxes and Depreciation/Amortisation) potentially hitting USD1b, and Free Cash Flow (FCF) reaching USD300m.
In the context of the Floating Production, Storage, and Offloading (FPSO) business, "first oil" refers to the moment when a new oil field or well begins producing oil for the first time. This is a significant milestone in the lifecycle of an oil and gas project, marking the transition from the development and construction phase to production. In summary, "first oil" is the point at which the FPSO and the oil field become fully operational, moving from the development stage to producing crude oil, thus starting the revenue phase of the project.