Yinson Holdings OUTPERFORM - 2 Jul 2012

Period    1Q13

Actual vs. Expectations

 Yinson’s 1QFY13 net profit of RM10.7m was way ahead of expectations, accounting for 38% of ours (RM27.6m) and 39% of the consensus’ (RM27.4m) full-year estimates. 

 Variance to our estimate was due to the betterthan-expected performance from its transport and trading divisions.

Dividends   No dividends were declared in the quarter.

Key Results Highlights

 YoY, 1QFY13 net profit grew +49.9% mainly on the back of 1) revenue improvements for the transport and trading divisions and 2) margin expansion from the marine division (+16.6pts) as the company shifted to vessel ownership (versus ship broking previously). 

 Qoq, 1QFY13 net profit grew +65.6% mainly due to the significant increase in the trading division, which saw significant activity post-CNY due to restocking exercises by Yinson’s clients. 

Outlook   Management guided that there could be a slowdown in the trading division’s activity, especially in 3QFY13 as prices of its goods have come off. As such, a gradual slowdown is expected moving ahead.  

 However, in the long run, we are positive on the company as: 1) its growth trajectory is ccelerating with its latest FPSO win; 2) its strong links to PTSC are a precursor to more Vietnamese opportunities; and 3) it is expected to post a 3-year net profit CAGR of 38.3%.

Change to Forecasts

 Given the strong performance of the trading division, we have revised our FY13 estimate where: 1) revenue assumptions for the two segments have been raised by 6.7% and 3.5% respectively; and     2) EBIT margin for the trading division has been raised to 4% from 3.5%. Overall, our FY13 net profit has been increased by 12.2% to RM31.0m (from RM27.6m).

 We have not revised our forecasts for FY14-15E as we expect the company to continue focusing on its marine and new floating projects (FSO and FPSO). Hence, we believe the transport and trading divisions will see lower earnings going ahead. 

Rating  MAINTAIN OUTPERFORM

Valuation    Target price unchanged at RM2.68/share based on FY14 Sum-of-Parts (SOP) valuation. 

Risks   1) Significant reliance on Petrovietnam poses an earnings risk to Yinson; 2) high capex requirements; and 3) contractual and project execution risks of new projects due to its inexperience.

Source: Kenanga