• Stay BUY and MYR3.06 TP, 23% upside. We expect stronger earnings in 2HFY24 (Jan) driven by the FPSO Anna Nery contribution and Nokh Solar Park project. Global FPSO demand remains robust and a higher level of upfront payment is being offered by clients amidst the contractors’ tight capacity. We continue to like Yinson 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.

• 1HFY24 core profit of MYR140m (+43% YoY) is deemed within our expectations, at 37% of our full-year estimate as we forecast stronger earnings in 2HFY24. Note, we have stripped off MYR387m EPCIC earnings and the MYR108m 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.

• 2QFY24 core earnings improved by 6x QoQ to MYR140m, thanks to the stronger FPSO operations led by the maiden contribution of Anna Nery post first oil in May 2023. This was partially offset by widened losses from the green technology division. Cumulatively, core earnings improved by 43% YoY on the back of stronger FPSO operations (Anna Nery earnings and rate escalation for operating FPSOs), masking higher 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. FPSO Maria Quitéria, Atlanta (project Enauta) and Agogo are on track for conversion, being 73%, 63% and 27% completed. Management highlighted that global FPSO demand remains robust but the contractors’ tight capacity could slowdown project rollout. As such, 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. The 285MWp solar photovoltaic (PV) project at Nokh Solar Park in India has experienced some delay in the grid connection and is expected to only start contributing in November this year. Meanwhile, Yinson is looking for a partner with expertise in battery energy storage systems or BESS to supply renewable energy or RE to Singapore. Note that it has invested in Canadian-based energy storage solution provider Sterling PBES Energy Solutions (SPBES) since 2021.

• 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: Further contract terminations and weaker-thanexpected operating uptime for existing vessels.

Source: RHB Securities Research - 2 Oct 2023