Stock pick: Yinson Holdings

RHB Investment Bank has maintained a “Buy” Recommendation for Yinson Holdings Bhd with a target price of RM7.40.

It said that removing one-off items and engineering, procurement, construction, installation and commissioning (EPCIC) gains, 9MFY22 (Jan) results came in within our expectations. “Yinson is confident to seal Atlanta FPSO project in the near term and FY23F EPCIC revenue will be supported by Parque das Baleias (PDB) vessel conversion,” it said.

RHB said that without changing the earnings estimates, the SOP-derived TP is kept at MYR7.40. It said that it has factored in the PDB project at MYR2.26/share, assuming USD1bn capex, 15% project IRR, 7% WACC, 80% debt funding, and 100% equity stake.

It said that its TP also incorporates a 4% ESG premium. Yinson has the highest ESG score within our Malaysia oil and gas sector coverage, given its venture into RE and green technologies. “Our preliminary assessment suggests that the Cukai Makmur impact is negligible – no changes to our earnings estimates. Downside risks: Further contract terminations and weaker-than-expected operating uptime for existing vessels,” it said

RHB said that the conversion of FPSO Anna Nery is progressing well, at 75% completion as of end-3QFY22, and operations are set to kickstart by 1QCY23. The remaining VLCC is currently on a spot charter and is expected to be sent for conversion by 1Q22.

Given that Enauta Energia SA has exercised the OSX-2 vessel option for the Atlanta FPSO project, Yinson is confident to seal the deal in the near term. Besides, EPCIC revenue is expected to stay in FY23F as the decline of Anna Nery EPCIC revenue will be cushioned by EPCIC revenue from the PDB project. As for the RE segment, there is a delay in the development of solar projects in India due to the rise of material costs amidst the COVID-19 pandemic.

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