Wednesday, September 30, 2015

Yinson: Seesawing Profits Left Investors Confused

Results Update

For QE31/7/2015, Yinson's net profit increased by 650% q-o-q or 155% y-o-y to RM78 million while revenue was mixed- down 10% q-o-q or 17% y-o-y to RM231 million. Pre-tax profit increased q-o-q due to forex gain of RM55 million & net gain from derivatives of RM18 million.


Table 1: Yinson's last 8 quarterly results


Chart 1: Yinson's last 32 quarterly results 

Yinson's net profit has been seesawing in the past 2 years. If we left out the forex gains, gains on derivatives & gain on bargain purchase (in QE31/7/2015, QE31/1/2015, QE31/10/2014 & QE31/1/2014), a clearer picture will emerge. The picture is one that shows earnings had peaked in QE31/10/2014. This is consistent with the breakdown in crude oil prices in August-September 2014.


 
Chart 1: Yinson's last 32Qs NP (as reported & adjusted for forex, derivatives & exceptional gains)  

Valuation

Yinson (RM2.90 yesterday) is now trading at a trailing PE of 10.4 times (based on last 4 quarters' EPS of 28 sen). However, if we exclude forex gain & derivative gains, the last 4 quarters' EPS would be reduced to. ~8 sen and PER would rise to 35 times. While the earning growth is impressive based on either reported or adjusted net profit, it is doubtful that this trend will continue given the current weak crude oil environment. As such, Yinson is deemed fully valued for now.

Technical Outlook

In the past 1 year, Yinson has transitioned from an uptrend to a sideways movement with a downward bias. Its resistance is at RM3.20 while strong support can be seen at RM2.30.


Chart 3: Yinson's monthly chart as at Sept 29, 2015 (Source: ShareInvestor.com)

Conclusion
 
Based on pedestrian operating financial performance and demanding valuation, I would rate the stock as SELL ON STRENGTH. Aggressive selling is not necessary yet as the technical outlook is still neutral.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Yinson.

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