• Stay BUY, TP drops to MYR3.29 from MYR3.32, 23% upside with c.2% FY26F (Jan) yield. We expect Yinson’s earnings to pick up in 2HFY25, led by a maiden earnings contribution from FPSO Maria Quitéria and Atlanta. Global FPSO demand remains robust, and Yinson is comfortable to secure another project as its current ones are approaching the tail-end of the conversion stage. We also see potential monetisation of its FPSO units as potential near-term catalysts for capital recycling.

• 1HFY25 core profit of MYR230m (+44% YoY) came in within our expectations, at 39% of FY25 core earnings as we anticipate stronger 2HFY25. Note: We have stripped off MYR155m in EPCIC earnings (inclusive of a MYR160m EPCC-related finance cost that is being classified under corporate debt), as well as a MYR35m fund investment impairment reversal, to arrive at our core profit figure. We believe Street estimates may not be a good comparison as other analysts regard Yinson’s EPCIC earnings as core profit. Management declared a second interim DPS of 1 sen.

• 1HFY25 core earnings improved 44% YoY to MYR230m, mainly led by stronger FPSO contributions that, in turn, were led by the full contribution from Anna Nery which achieved first oil in May 2023. This is being further anchored by lower operational overheads and better contribution from both the green technology and renewable energy units.

• Outlook. FPSO Maria Quitéria and Atlanta (the Enauta project) are at the final stage of commissioning and looking to achieve first oil in October and December. Meanwhile, FPSO Agogo is on track for conversion, being 75% completed. First oil has been scheduled for 4QFY26. We expect FPSO earnings to pick up in 4QFY25, driven by the maiden earnings contribution from FPSO Maria Quitéria and Atlanta. Global FPSO demand remains robust and Yinson is still actively bidding for new projects. As it is currently a vendor’s market, the group will pace up its new project take-up, with two new jobs in two years. The potential monetisation of the FPSO projects is still on- going and this should allow Yinson to fund new projects without resorting to equity fund-raising. Yinson remains committed to paying quarterly dividends, with a 5-year 30% CAGR guidance. This is premised on strong earnings and cash flow, with EBITDA and FCF potentially hitting USD1bn and USD300m.

• We cut FY26-27F earnings by 10% and 3% to impute higher finance costs and a stronger MYR vs USD. Our SOP-based TP drops to MYR3.29 (including a 2% ESG premium) from MYR3.32 accordingly. Downside risks: Inability to win new jobs and contract terminations.

Source: RHB Research - 1 Oct 2024