KUALA LUMPUR: In light of the tight supply, Yinson Holdings Bhd is optimistic about the future of floating production, storage, and offloading (FPSO) contractors, who stand to gain from more favourable contractual terms and possibly higher project returns.
Global FPSO demand, according to RHB Research, is still strong, and Yinson feels confident in landing a new project after either of its current ones completes the tail-end conversion phase.
"This could present further upside to our valuation," it said in a note.
Recently, Yinson hosted an industry talk featuring Energy Maritime Associate (EMA) founder and managing director David Boggs.
Boggs highlighted that global contractors remain tight given that major players such as Single Buoy Moorings Inc (SBM) Offshore and Mitsubishi Ocean Development & Engineering Company (Modec) Inc still have outstanding orders.
As such, the clients are expected to continue offering favourable terms (including upfront payments and lower local contents) to contractors.
RHB Research said this may result in better project returns in general.
Financing wise, it said that although higher environmental, social, and corporate governance (ESG) compliance requirements are seen in conventional financial institutions, contractors are
exploring other alternatives such as project bonds, finance leases, and exports.
Credits.
"There is an emerging trend of operators owning the FPSO in the event contractor leasing is not feasible or too expensive," it said.
Meanwhile, RHB Research said Yinson targets delivering FPSO Atlanta and FPSO Maria Quitéria by the second quarter (Q2) to Q4 of the 2024 calendar year, while tendering for several projects and securing another project this year.
The firm said it is also exploring avenues to unlock FPSO and renewable operations.
"We maintain our earnings estimates and maintain a buy call on Yinson with a target price of RM3.06," it added.
