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Has the best FPSO & ESG drivers

Maintain BUY and MYR10.90 TP

Yinson has the best of both worlds: (i) clearest carbon reduction footprint strategy to-date and (ii) strongest FPSO prospects over the next 12 months. Petrobras’ PDB and Atalant’s Enauta’ jobs are the 2 brightest prospects, in our view. We see further upside to our TP, which partially incorporates: (i) these prospects and (ii) the MYR1b rights issue effect.

Best in ESG roadmap, globally

Yinson, in our view, offers the clearest and most comprehensive climate action plans, goals and direction among its global peers (SBM, Modec, BW Offshore). It commits to be: (i) carbon neutral by 2030 and (ii) net zero by 2050, with clearly defined 10-year targets (2020-30), (2031-40) and (2041- 50). Its carbon intensity, at 16.3kg CO2/ kg boe for its FPSO fleet, is arguably the lowest among peers and it aims to reduce this further to: (i) 11.4kg CO2/ boe (-30%) by 2030 & (ii) 8.0kg CO2/ boe (-51%) by 2050; based on 2020’s baseline. It also targets to grow its RE capacity from 330MW to 3GW/20GW by 2023/29E & is committed to green technology, having invested up to USD50m to-date on its e-mobility agenda.

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The FPSO market is back booming again!

The FPSO business is back booming again, with demand for FPSO now stronger than 2019 (pre-Covid 19 crisis level). The market is getting tighter (an operator’s market). Up to 20 firm prospects are being lined up over the next 12 months. At the same time, supply is tightening. Unlike 2019, many tenders now are only able to attract single bids due to: (i) the higher degree of difficulty in securing financing and (ii) the limited capacity by FPSO operators to take on new jobs. This dynamic situation offers these operators strong leverage during negotiation talks, with the enviable position of being able to pick and choose projects.

Yinson is well entrenched to capitalise in this cycle

Unlike its peers, Yinson has the capacity to take on 2 jobs (with a combined capex value of USD1.5b), without systemic risk and straining its balance sheet. The 2 prospects are: (i) Atlanta’s Enauta (a mid-size FPSO) and (ii) Petrobras’ PDB (USD1b capex; a big-sized FPSO), which, the market has yet to fully embrace, in our view.