Yinson's earnings from oil and gas set to quadruple to 85% of its profit (ext.STAR)

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 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.

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%.

Smartbiz: Counter has been overbought and is ripe for correction. Immediate support @2.02 and strong support @1.92. This is a mid-term investment pick.