Maybank says the interim charter on Yinson’s FPSO Adoon is expected and is in anticipation of a final decision soon. The investment bank also notes that the FPSO market is booming and the group is in an entrenched position to ride this upcycle.
Winning 1-2 new jobs in 18 month is a realistic possibility and Maybank IB has yet to incorporate this upside potential to its SOP based target price. The investment bank has also introduced an expanded ESG tear sheet for Yinson, assigning it an above-average overall score of 78, based on its aggregated quantitative/ qualitative/ target-based metrics.
To recap, Yinson has secured a 1-month contract extension; from Addon Pte Ltd for the charter of FPSO Adoon. The value of the contract extension is about USD3.4m (MYR16 m), similar to its previous contract. Save for the extension of the tenure, the terms under this extension are unchanged. In this aspect, Maybank IB says it is unfazed by the short-term charter, which will be its 5 th extension. This extension it says will allow time for the client to strategise its commitment, either to commit to a new, longer-term tenure and negotiate for new charter rates or exercise the purchase option of the asset. Any of the options pursued are positive to Yinson.
Looking ahead, there are reasons to expect more wins for the oil and gas player. Yinson is entrenched to ride on the FPSO boom and is currently eyeing 6 FPSO projects in 2022 namely, BP’s Block 31 SE-PAJ; Angola, ENI’s Agogo; Angola, Total’s Maka; Suriname, Jadestone’s Nam U Minh; VN, ENI’s Chissonga; Angola and PVN’s Block B; VN. Maybank IB posit that Yinson is likely the frontrunner for the first two jobs. The group can take on one of these two (estd. USD1.5b-2b) without systemic risk. Financing will be partially eased by the higher upfront payment (>30% of capex) by clients to get these projects started.
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 swing; Further weakness in oil prices 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.
