Yinson Commands A Strong Bet: Maybank IB

The investment bank has maintained ‘BUY’ call on Yinson and set its target price (TP) at MYR5.58.

Its Anna Nery FPSO project in China is 90% completed; on track to meet its delivery deadline. Meanwhile, its PDB and Enauta projects are still at preliminary stages, thus not affected by the latest Covid-19 lockdown.
Yinson remains well-entrenched to capitalise on this FPSO upcycle. With 6 prospects in the horizon, it targets 2 wins over the next 12 months. It is also exploring options to unlock FPSO assets by undertaking an IPO route, or bringing in a strategic investor.

FPSO Anna Nery project on track
Despite the setbacks (work order shutdowns) faced by peers (SBM) at the Chinese yards from the recent Covid-19 re-lockdowns, its project (Anna Nery aka Marlim 2) at Cosco’s Qidong yard is not affected. Work is
progressing well still (on budget and on schedule). It is over 90% completed and is targeted to sail away by mid-2023. Meanwhile, works on Petrobras’ PDB job (in Cosco’s Qidong yard in China) is still at the preliminary stage, unlikely to be affected by the lockdown, while Atlanta’s Enauta project, constructed in Dubai is not affected either.

3 strong bids, realistically targets 2
While Yinson has expressed interest in 6 FPSO projects in 2022: ((i) BP’s Block 31 SE-PAJ; Angola, (ii) Total’s Cameia; Angola, (iii) ENI’s Agogo; Angola, (iv) Total’s Maka; Suriname, (v) Jadestone’s Nam U Minh; Vietnam
and (vi) ENI’s Chissonga; Angola), the key focus is on the first 3 projects. Realistically speaking, it targets for 2 wins (capex size of USD1.5b) over the next 12 months, without going into systemic risk or over-gear. With a shortage of competent contractors, O&G companies (clients) will likely have to make larger upfront payments for projects.

Rights issue and value-unlocking proposals
Post the recent completion of the 1-for-1 bonus issue, the rights issuance to raise MYR11b-1.2b is targeted for completion by May/ Jun. Elsewhere; it is also exploring opportunity (by YE) to unlock value by undertaking an IPO route (on its FPSO assets/ ops) on an overseas bourse. The proceeds from the listing will be channeled to its future capex. This corporate exercise, coupled with the upfront payments from clients will likely cover
for the equity funding requirements for the two potential prospects highlighted above.

Value Proposition
▪ Arguably one of the most profitable FPSO operators globally (in terms of ROE). The 4th largest independent FPSO leasing entity worldwide in terms of fleet size (with operating presence in Asia and Africa). OSV is its complementary business.
▪ Unlike its peers, Yinson’s FPSO contracts are generally more bankable (strong counterparties), providing steady visibility (long-term charters, termination protection) with reasonable project IRRs.
▪ Has an experienced, lean management team with strong execution capabilities – proven track record in consistently delivering projects on budget, on time.

Upside Swing
▪ Rebound in crude oil price will be the most dominant near-term share price driver.
▪ New job wins (prospecting for 2-3 firm tenders) will contribute to a significant jump in earnings.
▪ M&A is not entirely ruled out as values are undemanding following the recent steep drop in asset prices.

Downside risk
▪ Further weakness in oil price will affect share price performance.
▪ Poor execution capabilities and/or contract(s) termination related to its FPSO operations and inferior
cost management would have a detrimental effect on earnings and market perception.

Salient points on this counter:

Share Price MYR 2.47
12m Price Target MYR 5.58 (+126%)
Previous Price Target MYR 5.58

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