Yinson Holdings - Above Expectations Again

Period    3Q13/9M13

Actual vs. Expectations     Yinson’s 3Q13 net profit of RM8.5m brought its 9M13 net profit to RM29.1m. This was above both our (RM31.0m) and consensus (RM31.5m) full year estimates, accounting for 95% and 92% respectively.

 The variance to our estimate was again due to the better-than-expected performance from its transport and trading divisions.

Dividends   No dividend was declared in the quarter.

Key Results Highlights    QoQ, 3Q13 net profit dropped by 12.7% (from RM9.7m in 2Q13) mainly due to 1) lower trading division revenue (-18.6%) as the business slowed down (as expected) and 2) lower marine division margins as most of the work majority of the incremental revenue (+RM28.8m from 2Q13) was third-party charters and thus fetched very low margins.  

 YoY, the 3Q13 net profit was up 5.9% (from RM8.0m in 3Q12) mainly on the back of: 1) higher marine division as revenue as there were more third-party charters, and 2) margin expansion in the trading division (+1.2ppts).

Outlook   In the long run, we are positive on the company as its growth trajectory is accelerating. The company is looking to kick-start its FSO operations in FY14 and FPSO operations in FY15.

 Strong links to PTSC are a precursor to more Vietnamese opportunities and it is expected to posta 3-year net profit CAGR of 38.8%.

Change to Forecasts    Due to the strong performance in 9MFY13, we are lifting our full year numbers to RM34.0m (from RM31.0m previously) on the back of higher margins assumption for its trading division. 

 Note that our forecasts imply a weaker 4Q13 as we assume the trading division to be weaker as business typically slows down towards the end of the year, and potentially weaker marine earnings as such third-party charters continue. 

 We are also adjusting our FY14-15E net earnings higher to RM48.5m-RM73.2m (from RM47.6mRM72.3m) after imputing higher earnings contribution from trading division (+~6%) 

Rating  MAINTAIN OUTPERFORM

Valuation    Our target price is upgraded to RM2.71 from previous RM2.68, 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