• FPSO Parque das Baleias (PDB) project will enter into a re-bid as Petrobras seeks for a more competitive rate amidst low oil price. We think Yinson remains the leading candidate for the project given no changes in the technical specification of the project.
   
• We maintain our FY21-23F earnings forecast at this juncture as we have not imputed any construction gain of FPSO PDB yet.

• Despite the setback, we remain in favor of the company due to (i) good track record in FPSO project execution, (ii) limited competition amidst growing Brazil FPSO demand; and (iii) proxy to renewable energy (RE) play.

• Maintain BUY with a lower TP of RM6.30 (from RM7.70) as we turned more conservative with our assumption. With the stock price react negatively towards the news, we think it is a good opportunity to accumulate into the stock.

FPSO Parque delayed for a year

Petrobras has cancelled the FPSO Parque das Baleias charter bid as it is reviewing its development strategy amidst low oil price. This will see the project entering into a new bidding process with the first oil target being pushed back by a year to 2024. We believe that the rate Yinson submitted was deemed too expensive for Petrobras given its zero local content project status, hence being the reason for the need for such re bidding exercise. Recall that Yinson was left as the sole bidder after Bluewater-Saipem JV was disqualified on technical grounds.

Yinson remains the leading candidate for the project

Despite the bidding will start anew, management shared that there will be no changes to the technical specification requirement of the FPSO as well as zero local content requirement. As such, we think Yinson remains the leading candidate to secure the project. In order to achieve first oil in 2024, it is now expected that the re-bid to start by end of 2020 before the winner to be announced sometime in 3Q2021.

No change to earnings forecast

We keep our forecast unchanged as we have not imputed any construction gain from FPSO PDB into our forecast. Despite the setback, management vowed to grow its footprint in Brazil. Currently, it has an active bid to supply Atlanta FPSO to Enauta’s Santon basin offshore Brazil. It may also participate in Petronas’ Limbayong FPSO bid which also went into a retender.

Maintain BUY with reduced TP RM6.30

We cut our TP for Yinson to RM6.30 (from RM7.70) as we roll-over our valuation to FY22 as well as turning more conservative in our assumption. We think Yinson is still the leading candidate to secure the project. Our TP implies 12x PE on FY22F. Maintain BUY.

Source: BIMB Securities Research - 19 Oct 2020