• 1HFY24 core net profit of RM372m was 41% of our previous FY24F forecast, below expectations as FPSO Anna Nery’s standby rates were delayed.
• We cut our FY24F core EPS forecast to remove the above standby revenues, and reflect higher green tech losses and corporate overheads in FY25-26F.
• Reiterate Add with a lower SOP-based TP of RM3.27 due to the EPS cuts and the capitalisation of higher overheads of RM200m p.a. (from RM150m).

2QFY1/24 profits benefitted from FPSO Anna Nery’s first oil

2QFY24 core net profit of RM197m was 13% higher qoq, as the FPSO Anna Nery achieved first oil on 7 May 2023, upon which the vessel began booking in its full-time charter rates, partially offset by lower EPCIC profits due to a slowdown in the pace of construction of two FPSO projects, i.e. the FPSO Maria Quiteria (MQ) and FPSO Agogo. The construction of the MQ advanced 15% pts in 1QFY24, but only 12% pts in 2QFY24 to 73% completion. Meanwhile, Yinson booked a maiden 17% completion rate on the Agogo in 1QFY24, but a lower 10% pts advance in 2QFY24 to 27% completion. In contrast, the Atlanta’s construction advanced 14% pts in 1QFY24 but a faster 17% pts advance in 2QFY24 to 63% completion, but the Atlanta is a much smaller project than the MQ and Agogo projects. Against a year ago, the 2QFY24 core net profit was 81% higher, due to stronger profits from FPSO operations (due to the commencement of the Anna Nery) and EPCIC (as the Agogo construction was only recognised from 1QFY24).

Near- and long-term re-rating catalysts

With the Anna Nery already earning time charter hire, Yinson continues to execute its three current projects smoothly, with the Atlanta targeted to achieve first oil from 2QCY24F, MQ from 3QCY24F, and Agogo from 1QCY26F. These should continue to contribute EPCIC profits, albeit at gradually declining amounts, which is why we forecast lower yoy EPS estimates for FY25F and FY26F. Once the Agogo project is completed, we expect Yinson’s core net profit to reach RM1.1bn-1.2bn p.a. in FY27-28F. Potential re-rating catalysts include continued strong quarterly earnings from the time charter hire income of the Anna Nery. If Petrobras approves the Anna Nery’s standby rates, revenue of US$59m could be recognised in FY25F, or c.20% of our current FY25F core net profit forecast. Meanwhile, Yinson’s 4QFY24F should benefit from the connection of its 80%-owned Nokh solar power plant in India (capacity of 288 MWp) to the Indian power grid in late-Oct 2023F or earlyNov 2023F; Yinson guided for revenue of RM16m/quarter and EBITDA of RM12m/quarter.

Green technology segment may post losses for a while

Downside risks include construction cost overruns and execution challenges for Yinson’s existing FPSO projects, continuing losses from Yinson’s investments in various companies under its green technologies segment, and the burden on internal cash balances from Yinson’s future renewables investments. Yinson may have to raise cash via the partial divestment of existing FPSO assets, or add to its borrowings to fund the RE rollout. 

Source: CGS-CIMB Research - 2 Oct 2023