• Yinson secured FPSO Marlim 2 project from Petrobras worth US$5.4bn for a 25-year firm lease-and-operate contract.

• We estimate average DCR at US$590k/day which is c.14% lower than the initial bid at US$683k/day and c.9% below our assumption of US$650k/day.

• Near term outlook remain robust ahead of another 2 contract awards from outstanding bids (i.e Parque and Pecan).

• Reiterate BUY with unchanged SOP-derived TP of RM7.70 that implies 33x FY20F PE before it drops off to 22x FY21F. We see further growth potential amidst strong FPSO demand and limited competition.

Secured Marlim 2 FPSO from Petrobras

Yinson announced that it secured the lease-and-operate contract for Marlim 2 FPSO to Petrobras for approximately 25 years with first oil expected in 1QCY23. The contract value is worth c.US$5.4bn which implies DCR of US$590k/day. This will more than double existing orderbook to c.US$10bn. While final DCR is lower than the initial bid (c.US$683k/day) and our expectations (US$650k/day), it is a good beachhead for Yinson to pursue further expansion in Brazil.

Robust near term outlook

Currently, there are another 2 outstanding bids. Yinson is the sole bidder for Petrobras’ Parque FPSO which is expected to be awarded in 1HCY20. Prior to that, it expects the Greater Pecan FPSO project off Ghana to be awarded by 1QCY20. For record, SBM Offshore was the only competing bidder that has not win any bid in Africa. We believe this may provide Yinson a competitive advantage. Should Yinson secure the project, we roughly estimate it would add another RM1.20/share to its value.

Revision to assumption

We adjusted our DCR assumption accordingly and pared down our capex assumption as per management guidance. Our earnings have yet to reflect the impact from IFRS16 finance lease accounting standard pending management guidance.

Reiterate BUY with unchanged TP RM7.70

We reiterate our BUY call with an unchaged SOP-derived TP of RM7.70 which implies 33x FY20F PE before it drops to 22x FY21F. We see further upside potential to our TP amidst strong FPSO demand and limited competition.

Source: BIMB Securities Research - 17 Oct 2019