• Stay BUY, with new TP of MYR3.15 from MYR3.28, 30% upside. Removing the one-off items and EPCIC gains, 9MFY23 (Jan) results came in below our estimate due to a higher cost base. Management guided that the likely peaked administrative cost will be offset by new projects once they achieve first oil. Meanwhile, we expect finalisation of the Agogo project in the near term and continue to see progression in its renewable ventures.

• 9MFY23 core profit of MYR146m (-36% YoY) is below our estimate – at 55% and 36% of our and Street full-year forecasts due to higher-than- expected operating costs. We believe Street estimates may not be a good comparison, as other analysts regard Yinson’s EPCIC earnings as core profit.

• 3QFY23 core earnings dropped 44% QoQ to MYR34m, no thanks to higher administrative and finance costs. It comes after stripping off a MYR8m net FX gain and MYR113m in EPCIC gains. Revenue surged by 7% QoQ, mainly due to higher conversion revenue. Cumulatively, 9MFY23 core earnings fell 38% YoY, no thanks to lower renewable energy contributions, higher finance costs and overhead costs. This was partly cushioned by stronger FPSO operations (favourable FX impact led). The renewable energy segment, which encapsulates the solar asset in India, generated stable revenue of MYR57m but recorded a net loss of MYR10m due to unfavourable FX movements and lower other income.

• Outlook. FPSO Anna Nery is on track to achieve first oil by 1QCY23. Both FPSO Maria Quitéria and Atlanta (project Enauta) are on track for conversion, being 25% and 30% completed. Management guided that the administrative cost would be approaching peak levels amidst several ongoing project conversions and is expected to be offset by these new projects once they achieve first oil. Following the award of USD218m preliminary contract for FPSO Agogo, which is regarded as an upfront payment, Yinson is looking to finalise a long term charter contract in the near term. Meanwhile, the FPSO market remains robust with more new projects from Petrobras in Brazil. On the other hand, we are guided that 270MW out of the 485MW wind projects in Ceará, Brazil have been approved for construction and management aims to start construction work next year once the power purchase agreement (PPA) is secured. We expect better earnings contribution from the renewables segment once the 285MW solar plant achieves its completion at Nokh Solar Park in India.

• We cut FY23F-25F earnings by 3-14% to reflect the higher cost base. FY23F-24F EPCIC revenue should be maintained, led by contributions from FPSO Maria Quitéria and Atlanta. Post earnings adjustments, our SOP- based TP is cut to MYR3.15 (with a 4% ESG premium). Downside risks: Further contract terminations and weaker-than-expected operating uptime for existing vessels.

Source: RHB Research - 23 Dec 2022