Yinson’s earnings outlook set to be robust

PETALING JAYA: While maintaining effective “buy” recommendations on Yinson Holdings Bhd, analysts are nonetheless reducing their respective target prices on the energy infrastructure and technology group, as its results for its financial year ended Jan 31, 2025 (FY25) came in fractionally below expectations.

UOB Kay Hian Research (UOBKH Research) said that the group is adapting to enterprise reporting (ER) disclosure requirements and a mismatch between the research house’s profit forecast and Yinson’s inaugural ER was primarily due to the company’s higher refinancing costs, and lower income coinciding with the delayed first-oil from its floating, production, storage and offloading (FPSO) operations in Brazil.

“Notwithstanding a one-off Brazil cost impact, the fourth quarter of FY25 was a kitchen-sinking quarter that depressed FY25 accounting operating cash flow before working capital to only RM813mil.

“Despite this, the FPSO subsidiary Yinson Production’s earnings before interest, tax, depreciation and amortisation (Ebitda) was RM2bil, primarily driven by a full quarter’s lease contribution of FPSO Maria Quitera, and one-month lease for FPSO Atlanta,” the research house said in a note to clients yesterday.

UOBKH Research added that Yinson’s ER financials missed its expectation, as delayed first-oil in Brazil augmented the effect of higher-than-expected interest cost.

The research house said most parameters, including Yinson’s Ebitda, were aligned with its forecasts, but Yinson Production’s ER financing costs doubled year-on-year to US$165mil due to refinancing, thereby making the the research house’s forecast for group costs of RM800mil to be too low.

“The delayed first oil of Maria Quitera and Atlanta widened the income gap,” the research house said.

Meanwhile, Kenanga Research said Yinson’s core net profit for FY25 of RM441mil, which was adjusted for a number of transactions including a RM769mil gain on disposal of assets, RM116m loss on remeasurement of joint ventures, as well as a RM240mil loss on engineering, procurement, construction, installation, and commissioning (EPCIC), was just slightly below the research house’s expectation at 94% due to higher-than-expected finance costs.

Kenanga Research notably said it avoided comparing Yinson’s results to consensus profit forecasts as some other industry players make EPCIC earnings projections while others do not.

According to the research house, Yinson’s results briefing focused on upcoming charters for FPSO Agogo and FSO Lac Da Vang, and the RM500mil provision loss for FPSO Atlanta and Maria Quitera in 4Q25 due to higher-than-expected costs during the startup phases of the projects.

The research house said the group does not expect another provision of similar size in the future for the projects mentioned.

CIMB Research pointed out that Yinson’s outlook is underpinned by robust long-term earnings visibility from a substantial US$19.4bil order book, including potential extensions, stretching to 2048.

Additionally, the research house said the group’s earnings are set for strong growth from FY27 onwards, driven by contributions from the three new FPSOs Maria Quitera, Atlanta, and Agogo.

“Key re-rating catalysts include successful earnings delivery from all three FPSOs and the completion of the company’s asset value–unlocking exercise this calendar year. Downside risks include delays and cost overruns during the FPSO conversion phase, as well as increasing losses in its green technology division,” the research house said.

Both UOBKH Research and CIMB Securities kept their “buy” calls on Yinson, despite lowering their respective target prices to RM3.15 and RM2.93, respectively.

Kenanga Research maintained its “outperform” call, with a lower target price of RM3.15 from RM3.87.

Yinson closed five sen lower at RM2.15 yesterday.