• Stay BUY and MYR3.06 TP, 22% upside. 9MFY24 (Jan) results came in within expectations, with core earnings growth anchored by stronger FPSO operations. Global FPSO demand remains robust and Yinson is comfortable to secure another project once either of the projects reach the tail-end conversion stage. We continue to like the company for its exponential growth trajectory (41% 3-year CAGR), backed by the maiden contribution from three upcoming vessels while continuing its aggressive venture into green technology and renewables.

• 9MFY24 core profit of MYR281m (+92% YoY) is deemed within our expectations, at 64% of our full-year estimate as we forecast stronger quarterly earnings in 4QFY24. Note, we have stripped off MYR553m EPCIC earnings and the MYR112m deferred tax charge 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.

• 3QFY24 core earnings dropped 14% QoQ to MYR121m, largely dragged by higher finance costs. Cumulatively, core earnings improved by 92% YoY on the back of stronger FPSO operations (Anna Nery earnings and rate escalation for operating FPSOs), masking higher finance costs, and operational overheads, primarily personnel costs.

• Outlook. We understand that Yinson is still in discussion with the client on Anna Nery’s standby rate recognition since February and it will take some time before it can be approved and recognised. FPSO Maria Quitéria, Atlanta (project Enauta) and Agogo are on track for conversion, being 82%, 72% and 41% completed. Management highlighted that global FPSO demand remains robust where Brazil remains the bright spot with an estimated USD36bn floating production unit capex over the next five years, followed by the African region (c.USD17bn). In spite of this, the contractors’ tight capacity could slow down project rollout, and management expects a high level of upfront payment to generally be offered to contractors to reduce balance sheet constraints. Given there are three projects in the conversion/construction stage, the company is comfortable to secure another project once either of the projects reach the tail-end conversion stage. Yinson is unlikely to pursue the re-deployment project following the exclusivity agreement with BP for the reservation of FPSO Nganhurra expiring by the end-2023. The 285MWp solar photovoltaic (PV) project at Nokh Solar Park in India has commenced operations in November this year.

• We maintain our earnings estimates. FY24F-25F EPCIC revenue should be maintained, led by contributions from FPSO Maria Quitéria, Agogo and Atlanta. Our SOP-based TP is kept at MYR3.06 (including a 2% ESG premium). Downside risks: Unable to win new jobs and contract terminations.

Source: RHB Securities Research - 15 Dec 2023