Stronger FY21 results were within expectations, boosted by recognition of EPCIC profits from its new projects, full-year contribution of FPSO Helang, and the commencement of FPSO Abigail-Joseph in 4QFY21. Going forward, with YINSON still in active bids for several FPSO projects, we expect to group to land one new win in 2HCY21. Maintain OUTPERFORM with SoP-TP of RM6.95.

FY21 results within expectations. YINSON recorded FY21 core net profit of RM638m, coming in within our expectation at 95% of our forecast. However, it exceeded consensus forecast by 41%, partially due to the EPCIC profits recorded during the year, although we also acknowledge that other analysts may have different methodologies in calculating core net profit. Dividend of 2.0 sen per share is also within expectation, bringing full-year dividends to 6.0 sen per share.

Stronger earnings from new projects. YoY, FY21 came in stronger, largely from: (i) recognition of EPCIC profits from FPSO Anna Nery and FPSO Abigail-Joseph, (ii) full-year contribution from FPSO Helang, and (iii) fresh contribution from FPSO Abigail-Joseph which commenced operations in 4QFY21.

Meanwhile, 4QFY21 recorded core net profit of RM137m, representing a QoQ decline of over 40%. The poorer results were attributable to the absence of the outright sales recognition of FPSO Abigail-Joseph, partially offset by the commencement of the said asset during the quarter.

Expecting new contract win within the year. YINSON is still in active bids for several FPSO projects, which include: (i) Parque das Baleias, Brazil, (ii) Pecan, Ghana, and (iii) Limbayong, Malaysia. We expect the group to secure at least one of the above, with a projected award date in 2HCY21. While Petrobras extended the tender submission date for Parque das Baleias by two months (from March to May 2021) in efforts to induce more bidding competition, we are generally not overly worried by this, and still see YINSON as a strong frontrunner. The lack of bidding competition, especially for Brazilian FPSOs, have been apparent in recent projects, such as: (i) Itapu, where Petrobras had extended bids multiple times due to lack of bidding competition, only to ultimately scrap the bidding process in favour of redeploying an old FPSO, (ii) Buzios-6, where Petrobras opted to skip a public tendering process and engaged in direct discussions with SBM, and (iii) Mero-4, where SBM emerged as the sole bidder for the project. Overall, with YINSON still the sole bidder in Parque das Baleias, we rest our case for the group to be the favourite to land the project.

Maintain OUTPERFORM, with unchanged SoP-TP of RM6.95 (implying forward PER of 13x). Post-results, no changes were made to our FY22E numbers, and we introduce new FY23E numbers.

Note that we have already priced-in one new win assumption into our SoP valuations. Keen investors should also be aware of the counter potentially failing its Shariah-compliance during the upcoming November review, and there may be equity fund raising/rights issue post contract win.

Risks to our call include: (i) project execution risk, and (ii) weaker-than-expected margins, and (iii) unexpected contract termination.

Source: Kenanga Research - 26 Mar 2021