MARC has assigned a preliminary rating of A+_IS to Yinson Holdings Berhad’s proposed RM1.0 billion Islamic Medium-Term Notes (IMTN) programme with a stable outlook. This follows the corporate credit rating of A+ that MARC assigned to Yinson on June 23, 2021.

The rating on the IMTN programme is driven by Yinson’s strong business profile in the floating, production, storage and offloading vessels (FPSO) segment, sizeable long-term FPSO contracts and healthy profit margins. The key moderating factors are the weak-to-moderate credit profile of most of its charterers and the high leverage position of its holding company due to recourse borrowings.

With five FPSOs (a sixth is under construction) and one FSO, Yinson is considered as a large independent global player in the FPSO segment. The group has an FPSO order book of US$9.7 billion as at end-July 2021 with firm contract tenures up to 25 years. We view that as a result of oil price recovery since 2Q2020, the prospects for the upstream oil and gas industry is stronger than it has been in recent years and would support growth in the FPSO segment.

For the first half of financial year ending January 2022 (1HFY2022), group revenue (excluding construction revenue from a new FPSO) was relatively stable at RM696.0 million (1HFY2021: RM684.0 million), owing mainly to the recurrent income from charterers under existing long-term contracts. Operating profit margin stood at 27.6%. Gross debt-to-equity (DE) ratio stood at 3.41x (net DE: 2.63x). Excluding non-recourse financing, Yinson’s DE ratio would be 1.78x as at end-July 2021 but this is expected to increase to 2.16x, assuming full drawdown of the rated programme.

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