KUALA LUMPUR, Jan 7 (Bernama) -- Bursa Malaysia’s benchmark index rebounded from earlier losses to close at its intraday high on Wednesday, gaining 0.27 per cent in late trading as buying interest returned to selected heavyweights. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 4.48 points to 1,676.83 from Tuesday’s close of 1,672.35. The benchmark index opened 0.88 of-a-point lower at 1,671.47 and subsequently hit a low of 1,665.94 during the mid-morning session before gaining momentum toward closing. On the broader market, losers led gainers by 565 to 512, while some 526 counters were unchanged, 1,046 untraded, and 10 suspended. Turnover improved to 2.73 billion units worth RM2.76 billion versus Tuesday’s 2.66 billion units worth RM2.76 billion. Dealers said that investors were cautious following geopolitical developments in Asia.
Reiterate BUY and MYR4.35 SOP-based TP
4QFY1/16 results, due next week, are unlikely to spring any surprises. Operationally, the conversion of its FPSO Genesis is on schedule (which market has yet to fully appreciate the impact) and the planned sale of its non O&G operations will be concluded by 2HCY16. The expected 15sen special DPS (5% yield) is a short-term catalyst and Yinson stays in position to capitalise on the demand for new FPSO projects worldwide.
Results to meet our expectation
Yinson’s 4QFY1/16 results are expected to be out next week. We expect Yinson to post a core net profit of MYR40m-49m (-12%-28% QoQ; +7%+32% YoY) in 4QFY1/16. This would bring FY16 core earning to MYR172m-181m, within our forecasts but below consensus’ MYR193m. The FSO/FPSO operations continue to be the Group’s key earnings driver. We expect weaker earnings from OSV and its non O&G operations (trading & transport). We do not rule out a DPS for 4Q16, based on historical trend.
CY17: Delivery of FPSO Genesis, sale of non O&G ops
We expect FY17 to be a flattish earnings year as Yinson prepares for the delivery of its FPSO Genesis, which is on schedule for first oil production in CY17. We expect FPSO Genesis to contribute MYR50m (a 6-month impact) to Yinsons’s FY18 earnings. Meanwhile, the planned divestment of its non O&G operations is expected to be completed by 2HCY16. We expect shareholders to be rewarded with a special DPS of 15 sen from this transaction.
A steady cash generating entity soon …
Post sale of its non O&G biz, Yinson will generate steady cash flows from its FSO/FPSO operations, potentially turning it into a dividend play stock. A policy will likely be unveiled soon. We value Yinson’s: (i) FSO/ FPSO operations on NPV, (ii) ports operations on 1x book value and (iii) OSV, transport, trading & project management businesses on 8-10 PERs.
Source: Maybank Research, 25 March 2016
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