According to CGS-CIMB Securities Sdn Bhd (CGS-CIMB Research), YINSON Holdings Bhd is the best investment in the floating, production, storage, and offloading vessel (FPSO) sector of the oil and gas (O&G) industry.
It predicted that Yinson will achieve high earnings growth as a result of the implementation of new FPSO projects and new FPSO charters in a research note published today.
In the following five years, Yinson’s earnings are projected to expand significantly as new FPSO projects are completed and their long-term charter periods are started. According to the report, Yinson is also researching renewable energy initiatives.
It has a “Add” call with a 52-week target price (TP) of RM3.50 on the counter. Yesterday, the shares were closed at RM2.59. RM2.77 was its 52-week high and RM1.83 was its 52-week low.
It observed that Yinson highlighted the robustness and defensiveness of its FPSO business, which generates almost all of its sales and profits.
It claimed that because Yinson is eligible to earn termination payments should the charterers choose to terminate the charter contracts early, its ongoing FPSO charter contracts are not affected by changes in the price of oil.
It claimed that Yinson is also legally safeguarded by its ongoing FPSO construction contracts, under which Yinson is entitled to full payment from the E&P firm for all capital expenditures made up until the point at which the E&P company decides to regain control of the project.
However, it also stated that Yinson recognised that if crude oil prices fall below US$60 per barrel, new FPSO contract awards will undoubtedly be delayed down. This just occurred in the wake of the oil price crash at the start of the Covid-19 epidemic in 2020.
“The FPSO market conditions are currently very strong, with many independent FPSO contractors, such as Yinson, busy with ongoing FPSO construction projects, and many to-be-awarded FPSO projects in the pipeline,” it was stated. – TMR
