Decent tender visibility for the coming year bodes well for Yinson

Setting the standards: Yinson Holdings Bhd have a proven track record in consistently delivering projects on budget and on time.

PETALING JAYA: Decent tender visibility for the coming year bodes well for energy solutions provider Yinson Holdings Bhd amid growing expectation of a recovery in the economy.

The company is relooking the floating production storage offload (FPSO) Limbayong project, which has been revived by Petronas in a joint venture with MISC Bhd, and another FPSO project in Brazil – Atlanta Phase 2 – by oil company Enauta, with the award expected by end-2021.

Yinson is also exploring a potential redeployment of FPSO Lam Son, which is currently chartered to PetroVietnam, but whose tenure is uncertain after the contract ends on Jun 30 next year.

Analysts also do not rule out the possibility of Yinson winning the rebid of the FPSO Parque das Baleias (PDB) project.

“After deciding in October not to award the FPSO PDB contract to Yinson, Petrobras has opened a rebidding exercise that is due on 17 Mar 2021. Yinson has strong competitive advantages in the rebid, as it is far advanced compared to other players in terms of engineering and design.

“If Yinson wins the FPSO PDB project that will be deployed in 2024, it will probably embark on an RM500mil-RM700mil rights issue, because borrowing has become more difficult in the low oil price environment, ” said CGS-CIMB.

Maybank IB Research said the company has the capacity to take on either the PDB or Atlanta jobs and the smaller Limbayong project without running into systemic risk.

The research firm noted that Yinson is arguably one of the most profitable FPSO operators globally in terms of return on equity.

It is the sixth largest independent FPSO leasing entity worldwide in terms of fleet size with operating presence in Asia and Africa.

Unlike its peers, Yinson’s FPSO contracts are generally more bankable, Maybank IB said, providing steady visibility with reasonable project internal rate of returns.

“The company also has an experienced, lean management team with strong execution capabilities and proven track record in consistently delivering projects on budget, on time, ” it added.

Analysts have maintained their “buy” call on Yinson as new job wins will contribute to a significant jump in earnings.

Maybank IB kept its target price at RM6.20 while CGS-CIMB raised its target price to RM6.80 from RM6.56 previously.

CGS-CIMB also noted that Yinson may do additional equity issues in the future to fund its entry into renewables projects, which Yinson feels is an attractive place to invest given the lower level of activity in the FPSO space.

Meanwhile, AmInvestment also kept its “buy” recommendation on the stock with unchanged fair value at RM7.20.

“While our fair value is unchanged, we have raised FY21F-FY23F earnings by 7%–41% largely due to the profit recognition of the engineering, procurement, construction, installation and commissioning phase of the group’s FPSO vessels – the Nigeria-based Abigail-Joseph and Petrobras’ Anna Nery, ” said AmInvestment.

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