Nomura Maintains Buy Rating on Yinson, Bullish on FPSO Leadership and Business Restructuring

Overview

This research report is a briefing update from Nomura Securities following discussions with Yinson Holdings' (Yinson) investor relations team. The core view is that Yinson, as a leading global Floating Production Storage and Offloading (FPSO) operator, has a resilient order backlog and clear long-term growth trajectory. Additionally, strategic restructuring of non-core businesses has made substantial progress: GreenTech segment has turned profitable, while renewable energy business has improved revenue visibility by divesting Indian assets and focusing on high-return markets. Nomura maintains a 'Buy' rating with a target price of MYR2.86, believing current stock price does not fully reflect the company's fundamental improvements and valuation re-rating potential.

Core views

FPSO core business demonstrates strong moat with dual advantages in orders and capacity. Yinson currently holds $19.5 billion in FPSO orders, totaling $22 billion including renewable energy projects, with a weighted average contract life of 16 years. The company has sufficient capacity to secure at least two major projects this year, aiming to surpass SBM as the global leader by winning one large contract annually. Addressing industry-wide equipment delivery delays (e.g., 44 months for turbines), Yinson has established shipyards and supply chain networks in China for faster delivery and lower costs. Key focus is on the $1.5 billion Tangkulo project bid in Indonesia, with results expected in 1-2 months. GreenTech and renewable energy businesses have completed strategic reshaping, improving profitability. GreenTech has achieved overall positive EBITDA, with management decisively divesting e-scooter operations to focus on EV charging, vehicle leasing, and marine electrification. EV leasing fleet doubled to 500 vehicles last year, targeting 1,000 this year; two pilot electric marine vessels have been delivered, with five potential opportunities supporting independent sustainability. In renewables, the company is selling Indian solar assets to reallocate capital to better-regulated, higher-return markets like New Zealand and Peru. This shift expands the opportunity pipeline from $1 billion to $2.5 billion, with New Zealand wind farm plans scaling to 1GW and Peru targeting 500MW in two years. Clear financial targets and capital structure optimization underway. Company guides FY EBITDA of $900 million to $1 billion, significantly higher than last year's $600 million+, driven by Angola's Agogo project at full capacity. Nomura's conservative FY27F EBITDA estimate is $758 million. Capital-wise, RCPS funding covers three new projects without additional shareholder contributions. A $1 billion refinancing plan aims to replace short-term loans with long-term bonds/debt instruments, potentially reducing interest costs by 4-5 percentage points, redeeming expensive RCPS, and freeing cash flow for higher dividends. Management also hints at a potential overseas listing (e.g., US) for higher valuation once group EBITDA stabilizes at $1.5 billion.

Analysis framework

Nomura employs a typical 'sum-of-the-parts + event-driven' analysis framework. First, Yinson's complex diversified businesses are segmented into FPSO, GreenTech, and renewable energy for independent evaluation, avoiding obscured operational realities under consolidated metrics. For FPSO, key leading indicators include order book depth, contract duration, and equipment delivery capabilities. For transitioning businesses, milestones like EBITDA turnaround, fleet size, and asset disposal progress validate the investment thesis. Valuation applies SOTP methodology with differentiated multiples: DCF for FPSO, 1.5x PB for renewables, and 0.5x PB for GreenTech, better reflecting varying growth stages than a uniform PE. Finally, refinancing plans and overseas listing expectations are incorporated as potential catalysts, highlighting capital operation value.

Methodology notes

• Valuation methodsSOTP Valuation

  Sum-of-the-Parts Valuation

  For diversified companies, different segments are valued separately using appropriate methods (e.g., DCF for FPSO, 1.5x PB for renewables, 0.5x PB for GreenTech) to avoid distortion under a uniform multiple.

• Competitive & Strategic FrameworksMoat / competitive advantage

  Competitive Barriers from Supply Chain & Delivery Capabilities

  In capital-intensive industries, delivery speed and cost control are critical moats alongside patents. Yinson's China-based shipyards and supply chain shorten key equipment delivery cycles versus peers.

• Corporate Fundamentals & Financial FrameworksOperational/Financial Leverage Analysis

  Refinancing to Reduce Financial Leverage & Interest Burden

  Debt restructuring (short-to-long term, high-to-low interest) directly cuts interest expenses, boosting net margins without revenue growth. Yinson's planned 4-5 percentage point interest cost saving exemplifies financial leverage optimization.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Yinson (YNS.MK)

  Coverage target, FPSO leader + beneficiary of energy transition

  Strengths

  Deep order backlog, China supply chain cost efficiency, GreenTech turnaround, renewables portfolio optimization

  Weaknesses

  Reliance on few major project executions, historically costly RCPS drag

  Comparison

  6.8x valuation below peer 7.5x, long-term goal to surpass SBM as global leader

  Risks

  Execution risks, steel price surge eroding legacy contract margins

Key data

• FPSO Order Backlog$19.5 billionIncluding renewables, total $22 billion; weighted average contract life 16 years
• FY EBITDA Guidance$900 million-$1 billionSignificant growth from last year's $600 million+, mainly from Agogo project at full capacity
• EV Leasing Fleet Size500 vehicles (last year) → 1,000 (this year's target)Driven by strong market acceptance of Proton e.MAS model
• Renewable Energy Opportunity Pipeline$2.5 billionFocus on New Zealand and Peru, up from $1 billion previously
• Refinancing Size$1 billionExpected interest cost saving of 4-5 percentage points
• Current Valuation6.8x FY27F EV/EBITDABelow FPSO peer average of 7.5x
• Target Price vs. Current PriceMYR 2.86 / MYR 1.95Implied upside ~46.7%

Impact & implications

The report views Yinson as at a critical inflection point transitioning from traditional oil & gas services to a diversified energy infrastructure platform. FPSO provides a safety net and cash flow base, while GreenTech and renewables strategy unlocks a second growth curve. Winning the Tangkulo bid, successful Indian asset sales, and $1 billion refinancing could serve as triple catalysts for re-rating. Management's $1.5 billion EBITDA threshold and overseas listing vision offer clear performance anchors and exit expectations for long-term investors.

Risks

• Project execution risks
• Unexpected steel price inflation squeezing legacy contract margins
• Macroeconomic downturn leading to contract termination or renegotiation
• Contract delays or lower-than-expected day rates
• Equity dilution risks

What to watch

• Indonesia Tangkulo project bid outcome (expected in 1-2 months)
• Progress on Indian brownfield solar asset disposal
• Terms and timing of $1 billion refinancing plan
• EV leasing fleet reaching 1,000 vehicles target
• Group EBITDA progress toward $1.5 billion milestone