YINSON has evolved from a transport company into a sustainability-driven enterprise through its investments in green energy and alignment of its governance frameworks at both board and management levels. The company focuses on expanding its renewable energy pipeline in Latin America, Europe, and Asia. We maintain our forecasts, TP of RM3.04 and OUTPERFORM call.

YINSON gave a presentation in the Embracing Sustainability virtual event and below are the key takeaways:-

1) YINSON's evolution from a transport agency to a sustainabilityfocused energy company is marked by its investment in three main areas: Yinson Production (YP), Yinson Renewables (YR), and Yinson GreenTech (YGT). YP remains the primary revenue source, funding the growth of YR and YGT. The company aims for carbon neutrality by 2030 and net zero emissions by 2050, with initiatives to reduce GHG emissions, boost renewable energy capacity and invest in carbon removal technologies.

2) Governance frameworks at both board and management levels ensure alignment with low-carbon economy goals. Key milestones include creating integrated reports aligned with global reporting initiative (GRI) standards and United Nations sustainable development goals (SDGs), establishing Yinson Renewables and Yinson Green Technologies, and joining the United Nations Global Compact. Yinson's ESG efforts have earned recognition in S&P Global's Sustainability Yearbook and Sustainalytics’ ESG ratings.

3) Future initiatives focus on expanding the renewable energy pipeline, with projects in Latin America, Europe, and Asia Pacific. Yinson plans to develop a net zero solutions platform, invest in green tech companies, and drive innovation aligned with industry trends and government incentives. The company is committed to addressing Task Force on Climate-related Financial Disclosures (TCFD) gaps, enhancing ESG data assurance, and developing biodiversity policies, integrating sustainability into all operations to achieve its climate goals and drive sustainable growth.

Forecasts. Maintained.

Valuations. We maintain our SoP TP at RM3.04. Note that our TP reflects a 5% premium given a 4-star ESG rating as appraised by us (see Page 5).

Investment case. We continue to favour YINSON due to: (i) a strong FPSO order book pipeline with multiple major FPSO jobs under the conversion stage which provides significant earnings growth in coming years, (ii) its strong project execution track record which positions the company to benefit from strong structural demand for FPSO contractors anticipated in the coming years, and (iii) it being one of the first local oil & gas company invest in green technology companies (solar, e-mobility, etc) which in our view would help with the company’s long-term energy transition agenda. Maintain OUTPERFORM.

Risks to our call include: (i) crude oil prices falling below USD70/bb raising required IRR for new floating production projects, (ii) regulatory risks and uncertain returns for RE investments that are mainly focused on emerging markets (i.e. South America, India) and (iii) project execution risks including cost overrun, delays and downtimes for FPSO assets.

Source: Kenanga Research - 12 Aug 2024