Enhanced earnings visibility likely for Yinson

The Star

3 days ago

CIMB Research is maintaining its forecasts for Yinson.
PETALING JAYA: Yinson Holdings Bhd is poised to enhance its long-term earnings visibility and deepen its foothold in the offshore energy sector, supported by a recent contract win that further expands its recurring income base and solidifies its regional presence.
Analysts said they believe the deal announced earlier this week strengthens the group's position in Vietnam's offshore market, building on a decade of successful project execution and growing demand for cleaner energy infrastructure.
In a recent report, CIMB Research said: 'We view this development as a strategic win for Yinson, reinforcing its position as a leading independent offshore asset owner and operator.
'The award brings Yinson's fleet to 11 vessels, including the ongoing conversion of floating production, storage and offloading vessel (FPSO) Agogo, and marks its second floating storage and offloading (FSO) contract in less than a year. This reflects both the urgency of regional energy security and the shift toward cleaner energy solutions,' the research house added.
Yinson recently announced it had secured a contract from Phu Quoc Petroleum Operating Co for the charter, operation and maintenance of an FSO vessel for the Block B field off Vietnam via a 49%-owned joint venture with PetroVietnam Technical Services Corp (PTSC).
The firm portion of the charter spans 14 years, with an additional nine years of optional extensions, and carries an estimated contract value of US$600mil. First oil is expected by the third quarter of 2027.
The collaboration with PTSC marks Yinson's fourth partnership with the Vietnamese firm and further underscores its track record in the country.
'Once operational, Yinson is set to benefit from a steady, recurring income stream from the Block B FSO,' CIMB Research said.
With capital expenditure (capex) for the FSO estimated at approximately US$225mil (based on management's guidance of US$200mil to US$250mil), alongside an 85% margin in earnings before interest, taxes, depreciation and amortisation, a 23-year contract term, and Yinson's 49% effective ownership stake in the joint-venture company, the the research house estimated that the project could yield an internal rate of return of 9.3%.
While the financial contribution may not be substantial in the near term, the project provides additional upside to Yinson's solid earnings base.
'We project profit from the venture to range from RM6mil to RM22mil over the 23-year contract duration,' it added.
Kenanga Research also echoed a positive stance on the development.
'The win is viewed positively and based on an assumed US$200mil capex and a 9.3% discount rate, we estimate a discounted cash flow accretion of one sen per share. The expected earnings contribution is minimal at RM13mil, accounting for about 3% of 2026's estimated profit after tax,' Kenanga Research said.
Given Yinson's established track record in Vietnam and the use of a familiar shipyard, previously used for FPSO Lac Da Vang, the research house sees limited execution risk.
It assumes the project to be fully internally funded, considering its relatively modest scale and the joint venture's structure.
Kenanga Research revised its target price slightly to reflect the new contract, raising its sum-of-parts based target price to RM3.16 from RM3.15 after accounting for the potential discounted cash flow value of the win.
It maintained its 'outperform' recommendation on Yinson.
CIMB Research, meanwhile, is maintaining its forecasts and target price of RM2.93 for Yinson.
'We reiterate our 'buy' call on the company, underpinned by robust long-term earnings visibility from its substantial US$19.6bil order book, including potential extensions, stretching to 2048,' it said.