Saturday, November 15, 2014

Yinson ... NEXT After Awarded 3 Licenses By Petronas...

Its 30% owned associate company has been awarded three licenses by Petronas for floating offshore facilities, mobile offshore facilities and naval architecture and marine engineering. The licenses would be a new sources of income and Yinson can now directly tender for works relating to FPSO vessels, floating storage and offloading vessels and mobile offshore production units for Petronas and other oil and gas companies in Malaysia.

Earlier 2014 the potential license awards were seen as a catalyst for Yinson to participate more in the domestic oil and gas industry. Globally, it is the sixth largest FPSO player in terms of fleet size. It has been active in Vietnam and West Africa but not on the home front as it did not have a Petronas license to bid for jobs.

At rm2.60, its market cap was rm2.71 billion or at a forward PER of 23 times. The rich PER is backed by anticipated earnings growth in the financial year ending Jan 31 2016 and FY2017 after it has realized the full potential of its current fleet of FPSOs.

With oil prices below USD80 per barrel, observers do not see the Petronas licenses doing Yinson much good in the near term. The tumbling crude prices will cause oil companies to cut back on exploration thus reducing the need for FPSOs. Only when new fields are discovered and enter the production phase will there be a need for new deployment of FPSOs.

Moreover the new FPSO contracts will likely have depressed rates because oil companies are expected to squeeze the rates for their IRR.

Also do not expect to see Yinson to secure jobs within Malaysia anytime soon as project rollouts have been delayed or have slowed down amid the low oil prices.

More attractive catalyst for Yinson is its ongoing bids for overseas projects. Catalysts for the group stem from additional FPSO contracts, which the group is currently bidding for in West Africa and SEA.

Nevertheless the Petronas licenses will open up new opportunities for Yinson on the home front. Apart from allowing the company to bid for Petronas jobs, the licenses will also serve as strong credentials for the group.

Lim is the major shareholder of Yinson with a 35.5% stake followed by Tan Sri Mokhzani Mahathir’s Kencana Capital Sdn Bhd with 18.55% and the EPF with 5.83%. The EPF has been trimming its holdings in Yinson in Oct 2014.

Yinson has grown substantially over the past few years and some quarters believe that the group will expand its business in the oil and gas industry further.

The game changing acquisition of Fred Olsen Production in June 2013 marked a turning point for the group.

Currently (Nov 2014), Yinson has an order book of rm7.8 billion which is expected to last it till 2013.

After the acquisition of Fred Olsen, Yinson has grown immensely. In terms of fleet size Yinson is just three vessels behind Bumi Armada. In Malaysia, Bumi Armada is the largest FPSO player with five FPSOs and three under construction, followed by Yinson with four FPSOs and one under construction.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.