Yinson could see US$20 million to US$30 million gain from FSPO Marlim 2 construction

KUALA LUMPUR (Jan 31): Yinson Holdings Bhd could see a US$20 million to US$30 million gain in its financial year ended Jan 31, 2021 (FY21) if it delivers a US$100 million construction gain from the construction of the floating production, storage and offloading (FPSO) Marlim 2.

In a note today, RHB Investment Bank Bhd Research said the vessel is under phase 1 conversion at a Chinese shipyard, as it is more competitively price than conducting works at a Singaporean shipyard despite the additional supervisory cost present.

As such, Yinson has yet to finalise the construction gain recognised during the conversion period under the finance lease accounting method.

“ Putting things into perspective, if the project were to deliver US$100 million construction gain, Yinson could potentially recognise circa US$20 million to US$30 million in FY21F, which is 19% to 32% of our FY21F earnings,” the research house said.

The FPSO Marlim 2 project was commissioned by Brazilian national oil company Petrobas, which seek to use the vessel for the offshore Marlim oil field in Brazil.

Furthermore while the delivery date for the FPSO Abigail-Joseph had been deferred to May or June 2020 from January – on account of client permitted delay – the research house is not concerned over the delay as Yinson is not subjected to any penalties.

That being said, on the assumption that maiden earnings contribution from FPSO Abigail-Joseph are delayed for three months, RHB Research said its FY21 earnings estimates are likely to drop by RM35 million or 9%.

The FPSO Abigail-Joseph was previously known as FPSO Allen, and is to be deployed at the Anyala and Madu fields in Nigeria.

Furthermore, RHB Research said Yinson is bidding for new projects and according to oil and gas (O&G) publication upstream is one of the front runners for Petronas Carigali’s Limbayog project – in which Yinson has created a joint venture with MISC Bhd for the bid.

“It was reported that MISC-Yinson are the frontrunners against the other two players: Malaysia’s Sabah International Petroleum Co Ltd and India’s Shapoorji Oil & Gas Pvt Ltd,” RHB Research noted.

As such, RHB Research maintained its Buy call and RM8.22 target price (TP) on Yinson, as well as its earnings estimates for now.

It noted the construction gain recognition from the FSPO Marlim 2 is likely to outpace the one quarter earnings delay from the FSPO Abigail-Joseph to 2QFY20.

“ Note that the construction gain recognition has no impact to our TP given it is merely an accounting treatment without any cash flow impact. We reiterate our Buy call on the stock while our TP is kept at RM8.22 factoring in FPSO Marlim 2 and an additional new project win by this year. Risks are contract terminations and being unable to secure new jobs,” it said.

At the time of writing, shares in Yinson went untraded, with the counter last trading at RM6.20 per share, giving it a market capitalisation of RM6.79 billion.