YINSON has secured an O&M contract for the Helang FPSO which is set to commence operations in the Layang oilfield by 4Q CY19. Value for the contract is estimated at USD578m bringing the entire Helang FPSO contract value to approximately USD1.4b. BUY with a TP of RM5.00 implying PER of 22x/23x for FY19E/FY20E. 

YINSON received and accepted a letter of award from JX Nippon to undertake a contract for the provision of operation and maintenance (O&M) services for the Layang oilfield FPSO. The contract tenure is similar to the charter contract for Layang FPSO, which is a firm period of 8 years, with options for 10 extension periods of one year each. The O&M contract is estimated to be worth USD578m. 

We are positive on the O&M contract win for Yinson, serving as an additional income stream on top of the bareboat charter for the Layang FPSO believed to be c.USD860m in value. We estimate the O&M portion to be able to fetch approximately 30% EBIT margins. 

The FPSO is presently undergoing upgrading works in Cosco's Qidong yard in China and is expected to take about eight months to complete. The FPSO is currently on-track for commencement of operations in the Layang oilfield field off Sarawak by 4Q CY19. 

Overall, we continue to like YINSON within the FPSO space for being well managed, as proven by its project execution delivery and strong financial footing, coupled with contract winning ability moving forward.

Source: Rakuten Research - 15 Feb 2019