• Stay BUY and MYR3.31 TP, 24% upside and 2% FY26F (Jan) yield. We expect Yinson's earnings to pick up in 4QFY25, led by a maiden earnings contribution from FPSO Maria Quitéria (MQ) 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.
• 9MFY25 core profit of MYR418m (+40% YoY) came in within our expectations, at 71% of FY25F core earnings as we anticipate stronger 4QFY25. Note, we have stripped off MYR127m in EPCIC losses (inclusive of a MYR380m EPCC-related finance cost that is being classified under corporate debt), MYR163m HK subsidiary disposal gain, MYR19m PPE impairment reversal, MYR139m one-off FPSO MQ DCR escalation upon achieving first oil 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 third interim DPS of 1 sen.
• 9MFY25 core earnings improved 40% YoY to MYR418m, 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 as well as gain on remeasurement of finance lease receivables arising from the lease extension for FPSO Abigail Joseph. This is being further anchored by lower operational overheads and better contribution from the green technology and renewable energy units.
• Outlook. FPSO MQ has achieved first oil in mid-October this year while FPSO Atlanta is at the final stage of commissioning and looking to achieve first oil this month. FPSO Agogo is on track for conversion, being 80% completed. First oil has been scheduled for 4QFY26. 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 ongoing 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 maintain our earnings estimates and SOP-based TP of MYR3.31 (including a 2% ESG premium). Downside risks: Inability to win new jobs and contract terminations.

Source: RHB Securities Research - 16 Dec 2024