• Petrobras cancelled FPSO Parque das Baleias (PDB) project for the second time as both Petrobras and Yinson failed to reach into an agreement on terms.
• At this juncture, we maintain our FY22-24F earnings forecast as we have not imputed any construction gain of FPSO PDB yet. In near term, Yinson will turn its focus towards securing 3 FPSO projects namely Pecan, Limbayong and Atlanta Phase 2.
• The long delay in PDB contract award has created stock price overhang, in our view. With the project cancellation, we think this could instead shift the company’s focus towards other potential project and hence drive the stock price upward.
• We revise our recommendation to TRADING BUY with unchanged TP of RM6.30 ahead of possible exclusion from November Shariah list.
  
  FPSO PDB cancelled for the second time
  During analyst briefing, management shared that Petrobras has cancelled the FPSO Parque das Baleias (PDB) project bid for the second time as both parties failed to reach into term. Recall that Yinson emerged as the sole bidder despite the project entering into a re-bid as Petrobras seeks for a more competitive rate.
  
  Getting back into high gear
  Despite the setback, we remain sanguine with its outlook as the company is now able to turn its focus towards other incoming projects. At this juncture, Yinson has submitted bids for 3 mediumsized projects including Pecan (Ghana), Limbayong (Malaysia) and Atlanta Phase 2 (Brazil). We understand that both Atlanta and Limbayong projects may be awarded this year, whereas Pecan project may be delayed further as the Ghana government is acquiring the project from Aker Energy.
  
  No change to earnings forecast
  Following project cancellation, we keep our forecast unchanged as we have not imputed any construction gain from FPSO PDB in our forecast.
  
  Recommend TRADING BUY with TP RM6.30
  The long delay in PDB contract award has created stock price overhang, in our view. With the project cancellation, we think this could instead shift the company’s focus towards other potential project and hence drive the stock price upward. We maintain our TP at RM6.30 as we have not included this project into our valuation (Table 1). At our TP, the stock still offers potential upside of 39%. Our TP implies 12x FY22F P/E. In view of the short trading period ahead of possible exclusion from November Shariah list, we changed our recommendation to TRADING BUY.

Source: BIMB Securities Research - 25 Aug 2021