• Yinson Holdings (Yinson) secured a 1-month charter extension worth US$3.4mil (RM16mil) for its 100%-owned floating production, storage and offloading vessel (FPSO) Adoon from Addax Petroleum Development (Nigeria).

• The contract extension commenced on 17 October 2022 and is scheduled to be ended on 16 November 2022. While surprised by the relatively short duration of the extension period, we opine that it is likely to grant additional time for the client to re-negotiate tenure and charter rates, paving way for the next extension cycle.

• Moreover, we also note that the client could elect to acquire the vessel by exercising the purchase option in the agreement. We expect Yinson to record marginal gains on disposal should the client opts to acquire the FPSO.

• We retain FY23F-25F earnings which have already factored in the charter contract extension at the same rate amid heightened crude oil prices of above US$90/barrel. Overall, we are neutral on the extension award as the impact to Yinson’s FY23F net profit would only be minimal without FPSO Adoon’s contribution.

• We maintain BUY on Yinson Holdings (Yinson) with an unchanged sum-of-parts fair value of RM3.61/share, which also reflects a premium of 3% for our ESG rating of 4 stars given that the group is the first oil & gas service provider to invest in renewable energy assets proactively.

• The stock currently trades at a compelling FY23F PE of 14x vs. its 5-year average of 22x for a globally recognised FPSO player with a healthy balance sheet and multiple charter growth prospects across the globe amid limited operators that have adequate scale and financial resources.

Source: AmInvest Research - 21 Oct 2022