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Monday, June 11, 2012

Yinson's earnings from oil and gas

Yinson's earnings from oil and gas set to quadruple to 85% of its profit

PETALING JAYA: Last week, reports and rumours were swirling that oil and gas provider Yinson Holdings Bhd, together with its Vietnam partner PetroVietnam Technical Services Corp (PTSC), were extremely close to securing a US$500mil (RM1.6bil) job from Lam Son.
Lam Son is a joint entity of Vietnam's oil major PetroVietnam and Petroliam Nasional Bhd. PetroVietnam is PTSC's parent company which is a 100% state-owned entity that is authorised to deal with all petroleum-related matters in Vietnam.
The joint venture set up between PTSC and Yinson are said to be 51% and 49% respectively.
At Yinson's current orderbook size of some RM1.25bil, this contract would bring its orderbook closer to the RM2bil region.
Reports have indicated that the contract is for a period of seven years with an option to renew it for another three years. It entails supplying Lam Son an FPSO (floating production, storage and offloading) vessel.
For a fledging little company like Yinson, this certainly is a coup. Last December, together with PTSC, Yinson had piqued investors' interest when it won a RM1.01bil contract from Vietnam's oil major to supply a FSO (floating storage and offloading) vessel with a 20-year charter contract.
Yinson’s headquarters in Johor Baru. The small company attracted investors’ interest last December when it, together with PTSC, won a RM1bil contract from Vietnam.
This FSO is jointly-owned with Vietnam's National Oil Company and is currently being built in Sundong shipyard, South Korea.
It is expected to be delivered some time next year.
For a Malaysia-based logistics and building materials company, Yinson's shift in strategy to oil and gas has been increasingly apparent in the last two years.
Before winning these big contracts, it had on its own won an RM87.5mil platform supply vessel (PSV) charter contract in May 2010 and a RM75mil anchor handling tug supply (AHTS) charter contract in June 2011.
Both are deployed for PetroVietnam's offshore operations on seven-year charters.
For the oil and gas segment, Yinson has four core divisions and is predominantly involved in offshore marine services, commodity trading, logistics services and port operations.
For the PSV which is of 3,000dwt (deadweight tonnage), Yinson has a seven-year contract commencing from August 2010 to August 2017 to bareboat-charter the PSV for PetroVietnam's offshore projects from US$27mil (RM80mil) over the contract period.
“The day rate is respectable at US$3.50 per dwt, and we estimate Yinson will earn about RM7mil in net profit per anuum,” said Maybank Research.
Meanwhile, the AHTS which is of 5,000bhp (boiler horsepower) is also contracted for seven years beginning from July 2011 to July 2018 for more than US$20mil.
“The bareboat charter has a reasonable day rate of US$1.43 (RM4.43) per bhp. Yinson should make about RM5mil in net profit per annum from this vessel charter,” said Maybank.
Last July, Yinson acquired a 40% stake in the Southern Vietnamese port of Phu My for RM26.4mil. PTSC is its partner with the remaining 60% stake.
“While only breaking even now, we foresee the port operations to become the group's next earnings driver in Vietnam after the marine segment,” said Maybank Research.
Yinson is also involved in commodity trading such as vessel supplies for fresh water, hydraulic fluids, marine gas and oil among others. For its logistics services, the group offers trucking services, which has now been realigned to support units for its oil and gas activities.
Prospects in Vietnam are looking good, with an anticipated rollout of seven offshore projects between 2012 and 2014 that will require floating solutions such as an FPSO, FSO or a mobile offshore production unit.
Maybank Research said the fields which have been identified as potential prospects for floating solutions are Lam Son, Gau Chua-Ca, Ham Rong, Chevron's Block B, Dai Nga, Block 102/106 and Lac Da Vang.
For its financial year ended Jan 31, 2012, Yinson posted a 47.61% increase in net profit to RM27.37mil on the back of a 11.7% increase in revenue to RM15.82mil.
Based on its existing operations, Maybank Research said earnings contribution from the oil and gas division was set to quadruple, from 26% of group net profit for its financial year (FY) ended Jan 31, 2012 to 85% in FY14.
Last month, it raised some RM20.4mil after completing its private placement of 12 million shares.
Maybank is forecasting Yinson to deliver net profit growth of 25% to RM31mil in FY13, a 44% growth to RM45mil in FY14 and a 29% growth to RM58mil in FY15.
This implies a three-year net compounded growth of 32%.
“Growth in FY13 will be driven by its two new vessels coming onstream in the coming months, while FY14 will see a maiden contribution from its FSO operations.
“Overall, Yinson will enjoy the full-year effect contributions from these three newbuilds in FY15.
“We estimate the two OSVs will add a combined RM7mil to RM15mil per annum to net profit while its FSO will add between RM15mil and RM27mil per annum based on its 49% stake,” said Maybank Research.

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