• Yinson recently secured (i) the FPSO Helang O&M contract and (ii) FPSO Abigail-Joseph bareboat and O&M contract (at Anyala Madu field off Nigeria) with combined value worth US$1.4bn.

• FPSO players are more selective in new projects amidst limited gearing capacity. Given lesser competition, we expect Yinson to secure another US$1bn-sized FPSO project in 2019 (FY20F).

• We raised FY20/21F earnings forecast by 22/23% to account for new income from both assets.

• Upgrade the stock to BUY with higher SOP-derived TP of RM5.10 (from RM4.55). We expect new earnings stream from these 2 new FPSOs in 2H20F would boost share price.

Secured multiple contracts

Yinson recently secured multiple contracts in Malaysia and Nigeria worth US$1.5bn comprising works for FPSO Helang and FPSO AbigailJoseph from 2HFY20 (Table 3). This boosts orderbook to c.US$5.5bn.

Minimal cash outlay for Anyala Madu FPSO

The cash outlay for the conversion capex (at an est. US$50m) would be minimal as the charterer agreed to advance its cash for the conversion works. Additionally, capex is also reduced as Yinson would redeploy the idling FPSO Allan for the project (which will be renamed to FPSO Abigail-Joseph).

High odds of securing another project

The FPSO demand remained firm as Rystad Energy (a market research firm) expects a total of 33 upcoming projects to be sanctioned over 2019-2021 against 21 projects over 2016-2018 (Chart 1). Yinson is currently bidding for 4 FPSO projects (Table 2).

Revise earnings higher

We raised our FY20-22F earnings forecast by 22-25% (Table 4) to account for both FPSO contracts. We expect Yinson to secure another project in 2019 given low turnout in tender bid as some players are being more selective amidst prevailing limited gearing capacity (Table 1). We expect earnings to grow at 13% CAGR over FY18-22F driven by new earnings stream from new vessels.

Upgrade to BUY with higher TP of RM5.10

We upgrade the stock to BUY with a higher SOP-derived TP of RM5.10 (from RM4.55) (refer Table 5). This implies 21.5x FY20F EPS before it drops to 14.3x FY21F. We expect new earnings stream from the Helang and Abigail-Joseph FPSO in 2H20F to provide catalyse share price.

Source: BIMB Securities Research - 20 Mar 2019