MARC Ratings has affirmed its A+_IS rating on Yinson Holdings Berhad’s RM1.0 billion Islamic Medium-Term Notes (IMTN) Programme with a stable outlook.

Yinson group’s strong market position in the floating, production, storage and offloading vessels (FPSOs) business segment, its earnings visibility and healthy profit margins on long-term FPSO contracts remain key rating drivers. The rating is mainly constrained by the group’s high borrowing levels, reflecting the highly capital-intensive nature of its key business. In affirming the rating, MARC Ratings has considered the expected easing of the strain on Yinson’s capital structure from an impending rights issuance, with projected recourse gross debt-to-equity (DE) ratio improving to 1.77x (net DE ratio: 1.24x) by end-January 2023 from 2.28x as at end-January 2022 (net DE ratio: 1.76x).

Yinson is increasing its FPSO fleet to seven vessels with two still under construction, which will further strengthen its position as one of the largest independent global players. It has long-term earnings visibility, derived from sizeable existing FPSO charter contracts with an average tenure of 13.2 years. This notwithstanding, the weak-to-moderate credit profiles of the FPSO charterers – most of which are national oil companies in emerging countries – pose counterparty risks. The rating agency understands that the company has not faced any delays on its payments as at date.

For financial year ending January 31, 2022 (FY2022), Yinson recorded consolidated revenue (excluding construction revenue) of about RM1.4 billion and pre-tax profit of RM716.0 million, relatively unchanged from FY2021 given the recurrent nature of its revenue stream. Adjusted pre-tax profit margin remained strong at 51.1% while cash flow from operations stood at a healthy RM1.1 billion.

Borrowings (including perpetual securities) increased to RM10.6 billion (FY2021: RM8.0 billion) and were mainly used for the conversion of FPSOs, with an additional RM2.5 billion anticipated in FY2023. Proceeds from the planned RM1.1 to 1.2 billion rights issue, to be exercised by end-June 2022, will defray the capex for FPSOs.