• Stay BUY, new TP of MYR3.06 from MYR3.12, 19% upside with c.1% FY24F (Jan) yield. We continue to have a positive long-term outlook on Yinson’s commitment to its green transition. It continues to delve into green technology and renewable energy, while its FPSO business should still be the major earnings contributor for the time being.

• Committed player in the green transition. On Wednesday, Yinson hosted its stakeholder event named Synergy, which featured several keynote speeches and panel discussions by global energy leaders, industry and domestic experts, as well as the group’s senior management team. It has committed to have 30% of total equity in green investments by 2030 (from 8% as of FY23), and continues to see huge potential in green investment – and this space is still under-invested.

• Renewable energy (RE). Yinson targets to achieve annual RE generation levels of 1.7 TWh by 2025 and 5.6 TWh by 2030. Its RE arm is active in nine markets including India, Brazil, Peru and Chile. It is also assessing the potential of new markets like the UK, Spain and the Philippines. It guided that about solar and wind energy projects with a combined capacity of 774MW are in the pre-construction and construction stages. Other projects have capacities of 1066MW (in the development and consent phase) and >4400MW (at the site investigation stage). The construction of its 285MWp solar photovoltaic (PV) project at Nokh Solar Park in India is completed, and this facility may start contributing to group numbers in the near term, pending its grid connection. Meanwhile, its 486MW wind project in Brazil has progressed to the pre-construction stage.

• FPSO business will continue to be the biggest contributor to earnings and Yinson aims to have an operating fleet of 10 FPSOs by 2030. At present, it has five operating FPSOs, one operating FSO and three FPSOs under construction, with an orderbook (firm and options periods) totalling USD22.5bn. Along the way, Yinson could monetise some of these vessels – either through disposal or partial stake sell-downs. As such, we believe it may continue to tender for new projects in the medium term.

• We maintain our earnings estimates but our SOP-based TP drops to MYR3.06, with a lower ESG premium of 2% applied, based on a revised score of 3.1 (from 3.2) out of 4 – post recalibration of our in-house ESG weightage methodology. While we are positive on its green technology arm in the long run, we have yet to include it in our valuation – since this business may remain in the red over the near term. Downside risks: Further contract terminations and weaker-than-expected operating uptime for existing vessels.

Source: RHB Research - 16 Jun 2023