UOBKH Research said Yinson’s FPSO projects are on track.
PETALING JAYA: While Yinson Holdings Bhd
anticipates several new floating production storage and offloading (FPSO) projects for its financial year ending Jan 31, 2025 (FY25), concerns linger over its complicated balance sheet statements.
Analysts warned that this issue might not only confuse investors, but also prolong the stock’s hefty trading discount.
UOB Kay Hian Research (UOBKH Research) said in a recent report that Yinson’s FPSO projects are on track.
It said Yinson’s FPSO Atlanta had safely arrived in Brazil and is on track for first oil by August 2024, with project progress now at 82%, while the FPSO Maria Quiteria had recently set sail and will arrive in Brazil by the second quarter of 2024 (2Q24), with over 90% completion and first oil by year-end.
According to the research house, FPSO Agogo’s progress improved to 65% and is projected to achieve first oil by the start of FY27.
Despite these growth opportunities, UOBKH Research noted that Yinson’s share price continues to trade at a hefty discount to the asset’s realisable value, partly due to “accounting distortions” under International Financial Reporting Standards (IFRS).
“We have raised this issue before and believe that Yinson is working on bridging the financial gaps to a scenario if all the FPSOs are on operating leases,” the research house said.
The research house also believes that this mismatch is signalled by Yinson’s share buybacks.
“For instance, Yinson’s disclosure of its group net debt to earnings before interest, taxes, depreciation, and amortisation (Ebitda) appears to show a quarter-on-quarter improvement from 4.3 times to four times.
“However, based on IFRS disclosure of its 1Q24 group Ebitda of RM532mil, the ratio will reflect seven times, still an improvement from 8.1 times in the last quarter,” it explained.
UOBKH Research said Yinson is formulating a dividend payout plan from FY24 onwards, although the dividend per share (DPS) is expected to be modest as the group is still in a high-growth phase.
Meanwhile, Kenanga Research said Yinson will be paying quarterly dividends against its bi-annual or annual dividends at present.
“Yinson hopes to pay out a minimum of one sen dividend per quarter, which is consistent with our forecasts of a four sen dividend annually,” the research house noted.
On Yinson’s non-oil and gas business segment, UOBKH Research said the full Ebitda ramp-up will take time following the commencement of a second solar plant in Nokh, India, on Nov 3, 2023, which is expected to contribute an additional RM12mil in Ebitda on top of the existing RM10mil base.
Meanwhile, the 97 megawatt Matarani solar project in Peru is on track for an end-2024 startup, though it has been slightly delayed from the original 3Q24 target.
Once operational, the Matarani solar project is expected to contribute about US$7mil in Ebitda.
Looking ahead, the research house said Yinson remains keen to bid for projects, and has identified 21 potential FPSO opportunities worth about US$13bil in capital expenditure in the medium-term horizon.
UOBKH Research, which made no changes to its earnings forecasts for the company has maintained a “buy” call on the stock with an unchanged target price of RM3.90 a share.
