• Stay BUY, with new TP of MYR3.12 from MYR3.15, 29% upside. Removing the one-off items and EPCIC gains, FY23 (Jan) results surprised us positively, led by better FPSO operations and unexpected cost writeback. We continue to like the counter for its exponential growth trajectory (41% three-year CAGR) backed by maiden contribution from three upcoming vessels while continuing its aggressive ventures into green technology and renewables.

• FY23 core profit of MYR338m (+8% YoY) surpassed our full-year estimate at 152% due to unexpected cost writeback and better FPSO operations. Note that we have stripped off MYR398m EPCIC earnings in arriving at our core profit. We believe Street estimates may not be a good comparison, as other analysts regard Yinson’s EPCIC earnings as core profit.

• 4QFY23 core earnings spiked 4.7x QoQ to MYR192m, thanks to higher FPSO operations led by lower tax expenses, higher rate adjustments as well as writeback of cost provision in the previous quarters. It comes after stripping off a MYR70m net FX losses, MYR117m asset impairment, MYR22m PPE disposal gain and MYR144m in EPCIC gains. Revenue gained 13% QoQ mainly backed by higher EPCIC revenue of FPSO Maria Quitéria and Atlanta. Cumulatively, FY23 core earnings improved by 8% YoY, led by stronger FPSO operations (led by favourable FX impact and higher rates).

• Outlook. FPSO Anna Nery has started receiving partial charter income since February under a provisional acceptance and is expected to achieve final acceptance in April. Yinson has secured an additional USD50k/day charter rates uplift for this project to cater for higher capex and opex. Both FPSO Maria Quitéria and Atlanta (project Enauta) are on track for conversion, being 46% and 32% completed. Both vessels have slated to achieve first oil by 2Q-3QCY24. Following the singing of the 15+5 years’ charter contract for FPSO Agogo, the final acceptance is guided to delay slightly to early 2026. Management is eyeing to monetise a partial stake of these projects once they start contributing stable cash flows. Meanwhile, the 485 MW wind projects in Brazil progressed into pre-construction activities while the PV projects in Peru and Italy are targeting to achieve final investment decision or FID in the next 12 months. We saw an impairment of MYR117m made in 4QFY23 for the 285MW solar Project Nokh due to an increase in panel prices.

• We increase FY24F-25F earnings by 4-7% to better reflect FPSO contributions. FY23-24F EPCIC revenue should be maintained, led by contributions from FPSO Maria Quitéria and Atlanta. Despite earnings adjustments, our SOP-based TP is cut slightly to MYR3.12 (including a 4% ESG premium) with an update of its net debt position. Downside risks: Further contract terminations and weaker-than-expected operating uptime for existing vessels.

Source: RHB Research - 24 Mar 2023