• Overview. Yinson’s 2HFY21 core PATAMI grew 40% qoq to RM132m driven by structural earnings growth from new FPSO Anna Nery for Petrobras. The earnings growth came from construction profit recognition, contributing to EBITDA by RM117m and estimated PATAMI of c.RM40m. Our core earnings exclude unfavourable FX of RM22m and net impairment worth RM9.9m.

• Key highlights. Orderbook as at 2QFY21 remained strong at US$10.1bn (1QFY20: US$10.2bn). Finance costs declined by RM14.8m qoq due to fully repayment of FPSO JAK during refinancing exercise in 1QFY21.

• Against estimates: Above. 1HFY21 core profit came above both our and consensus’ forecasts at 67%. The main deviation against our forecast was due to different accounting treatment of finance lease for the FPSO Anna Nery. We raise our FY21F/22F/23F earnings by 36%/36%/19% (Table 3) to reflect the finance lease impact.

• Dividend. Yinson declared an interim DPS of 4 sen which implies payout ratio of 20%. This was similar to the DPS paid in 2QFY20.

• Outlook. FPSO Abigail-Joseph is expected to commence its operation by Oct 20. This will contribute to another structural earnings growth in the near-term. We still expect Yinson to secure the FPSO Parque contract with Petrobras worth over US$5bn (included in our TP) as there has been no indication from Petrobras to do retender exercise due to low oil price.

• Our call. Maintain our BUY call with unchanged SOP-derived TP of RM7.70 which implies 18x FY21F P/E (Table 4). We remain sanguine over its outlook due to (i) its huge orderbook of lease income USD10bn to be recognised over next 25 years and (ii) additional income from renewable projects to further sustain its earnings.

Key highlights from analyst briefing

• Finance lease impact. FPSO Anna Nery is classified as finance lease asset with the EPCIC profits to be recognised over the construction period (see Table 2). This will expedite profit recognition which follows S-curve structure as opposed to other operating lease projects which will only commence revenue and profit recognition when the lease period begins. Nonetheless, this has no impact on project cashflows.

Source: BIMB Securities Research - 29 Sept 2020