• Keep BUY, new MYR3.31 TP (from MYR3.29), 28% upside with c.2% FY25F (Jan) yield. Although the new contract win by Yinson’s JV from Murphy Oil will have a minimal impact for now, there is potential for this partnership to lead to future opportunities in other regions. Yinson is comfortable to win at least one more project by 1HCY25. We also see the potential monetisation of its FPSO units as near-term catalysts for capital recycling.

• A new win for the JV. Yinson’s 49%-owned JV, PTSC Asia Pacific (PTSC AP) has secured a contract for the provision, charter, operation and maintenance of the floating storage and offloading (FSO) vessel for the Lac Da Vang project with Murphy Oil. The contract has a firm period of 10 years with the option to extend up to five more years, and a total value of up to c.USD416m. The FSO will be a newbuild double-hull vessel with storage capacity of around 500k bbls and advanced dual-fuel systems. The FSO is expected to start operations in the Lac Da Vang field located in Block 15-1/05 offshore Vietnam in 4QCY26.

• Murphy Oil is a new client. This marks the third project with PTSC after FSO Bien Dong and FPSO Lamson. Meanwhile, Murphy Oil is a new client to Yinson and is a rather strategic one, as the company is looking to explore future opportunities with Murphy Oil in other regions. We have been guided that the gross project capex is estimated at USD200-250m. There will be upfront payments by the client, and the remaining equity portion is internally funded at the JV level.

• Minimal impact. Average earnings from this project are rather minimal, estimated at MYR15m pa (c.2% of FY26F). We maintain our earnings estimates for now, as the full-year contribution is expected to only flow in by FY28. Based on our back-of-envelope calculation, we value the project at MYR0.02/share, assuming a USD200m capex, 10% project IRR, 7.5% WACC, 80% debt funding, and 49% equity stake. Our SOP-based TP rises slightly to MYR3.31 (including a 2% ESG premium, based on its ESG score of 3.1).

• Outlook. Future FPSO awards are expected to return to historical levels of 10 vessels (from estimated seven awards in 2024) annually until 2030 (it expects to garner 14 and 12 awards in 2025 and 2026). FPSO contractors will continue to command pricing power, backed by constrained yard capacity amidst robust demand whilst cost pressures remain a major challenge.

• Downside risks: Being unable to win new jobs, and contract terminations.

Source: RHB Securities Research - 3 Dec 2024