[RAM] RAM Ratings affirms Yinson Holdings' corporate credit and IMTN ratings

RAM Ratings has affirmed Yinson Holdings Berhad’s (Yinson or the Group) A1/Stable/P1 corporate credit ratings and the A1/Stable rating of its Islamic Medium-Term Notes (IMTN) Programme of up to RM1.0 bil.

The affirmation is premised on Yinson’s credit fundamentals that are envisaged to remain supportive of the ratings. The Group’s positioning among global leading floating production systems (FPS) providers is reinforced by significant contract awards in recent years. Despite post-pandemic supply chain issues and cost escalations, the Group delivered its newest floating, production, storage and offloading (FPSO) vessel, Anna Nery, on time and within budget, achieving its first oil on 7 May 2023.

Yinson’s performance was within expectations in FY Jan 2023, particularly the progress of vessels under construction. Its top line jumped to RM6.32 bil (FY Jan 2022: RM3.61 bil) after revenue from engineering, procurement, construction, installation and commissioning (EPCIC) operations doubled and contributions from FPSO operations grew modestly. The stronger EPCIC operations raised Yinson’s bottom line to RM718 mil (FY Jan 2022: RM578 mil). 

Balance sheet strength and cashflow debt coverage were also largely within expectations. As at end-January 2023, total debts increased at a slower than projected pace to RM11.48 bil (end-January 2022: RM10.65 bil). Excluding non-recourse loans, gearing was an improved 1.74 times (end-January 2022: 2.28 times) despite higher debts, due to a RM1.19 bil rights issuance in June 2022. 

Over the next three years, we estimate total debts (excluding non-recourse) to continue to rise to fund the building of new vessels, with gearing peaking at about 2.1 times. Yinson’s adjusted operating cash flow (OCF, based on the Group’s share of total project free cash flow) debt coverage for fiscal 2023 stayed at 0.05 times and is expected to remain at similar levels for the next two years before possibly rising towards 0.1 times in fiscal 2026. The weak debt coverage is partly mitigated by Yinson’s healthy liquidity, backed by RM2.02 bil of cash reserves as at end-April 2023 against short-term debts of RM1.63 bil.

The ratings continue to be backed by Yinson’s market position among the world’s largest independent FPSO players. Its strong track record of prompt FPS delivery and operations places the Group favourably in a sector exposed to significant execution and construction risks, with high barriers to entry. On 28 February 2023, Yinson entered into a contract with Azule Energy for the provision and operations and maintenance of FPSO Agogo, the Group’s largest investment to date. The Group’s FPS leasing contracts amounting to USD17.78 bil as at end January 2023 (excluding USD5.3 bil FPSO Agogo contract) span 7-25 years, providing stable long-term revenue and earnings. Its small number of charterers, however, exposes Yinson to customer concentration risk.

Yinson owns and operates a 140 MW solar plant in India and is expected to commence operations on another in the country, with a capacity of 190 MW. The Group has set clear climate goals of reaching carbon neutrality by 2030 and net zero emissions by 2050 by growing its renewable energy segment and reducing the carbon footprint of its offshore operations. Yinson has a relatively small green technologies division with investments in nascent businesses and a modest fleet of offshore support vessels.


Analytical contacts
Ben Inn
(603) 3385 2510
ben@ram.com.my

Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my