YINSON has announced that its JV with PETROVIETNAM has signed a 10+5 years contract for an FSO vessel with Murphy Oil, expected to commence in 4QCY26. The contract is positive though offering just a small DCF-accretion of RM0.04/share, assuming 7.4% WACC and USD250m capex. Nevertheless, we believe the win could pave the way for more Murphy Oil-related jobs in the long run. We maintain our earnings forecasts and OUTPERFORM call, but raise our SoP-TP by 1% to RM3.60 (from RM3.55).

PTSC Asia Pacific (PTSC AP), a joint-venture between Yinson Production (49%) and PetroVietnam Technical Services Corporation (51%), has signed a 10-year firm contract with Murphy Cuu Long Bac Oil Co. Ltd., a subsidiary of Murphy Oil Corporation, for the provision and operation of an FSO vessel for the Lac Da Vang field, Block 15- 1/05, offshore Vietnam. The contract, valued up to USD416m, includes an option for a 5-year extension. The FSO is expected to commence operations in 4QCY26 following a two-year construction period.

Yinson estimates the project capex of approximately USD250m, which will be financed using PTSC AP's cash reserves and USD90m in new debt, ensuring no cash call is needed. The project is expected to contribute RM4m-RM5m PAT annually, representing a minor addition to Yinson's earnings. Based on a 7.4% WACC, the DCF accretion is calculated at RM0.04/share. While the immediate financial impact is modest, the deal positions Yinson for further potential collaborations with Murphy Oil in the future.

Forecasts. Maintained.

Valuations. We raise our SoP-TP by 1% to RM3.60 (from RM3.55) after accounting for the job win. Note that our TP reflects a 5% premium given a 4-star ESG rating as appraised by us (see Page 5).

Investment case. We continue to favour YINSON due to: (i) a strong FPSO order book pipeline with multiple major FPSO jobs under the conversion stage which provides significant earnings growth in coming years, (ii) its strong project execution track record which positions the company to benefit from strong structural demand for FPSO contractors anticipated in the coming years, and (iii) the group could seek to monetise its FPSO assets partially (selling minority stake) to recycle its capital as its new FPSO projects are nearing completion. Maintain OUTPERFORM.

Risks to our call include: (i) crude oil prices falling below USD70/bb raising required IRR for new floating production projects, (ii) regulatory risks and uncertain returns for RE investments that are mainly focused on emerging markets (i.e. India) and (iii) project execution risks including cost overrun, delays and downtimes for FPSO.

Source: Kenanga Research - 3 Dec 2024