RHB Investment Bank Bhd (RHB Research) has maintained its BUY call for Yinson Holdings Bhd, with a revised target price of RM3.31, reflecting a 28% upside, on account of a Murphy Oil contract win valued at US$416 million (about RM1.9 billion) in Vietnam by Yinson's 49%-owned JV firm with Petrovietnam.

The contract comprises the providing, operating, and maintaining of a floating storage and offloading (FSO) vessel for the Lac Da Vang project in Block 15-1/05 offshore Vietnam. The contract term spans a period of 10 years, with an option to extend by an additional five years.

The FSO vessel will feature advanced dual-fuel systems and a storage capacity of approximately 500,000 barrels, with operations scheduled to begin in the fourth quarter of 2026.

Analysts noted that the estimated capital expenditure for the project is between US$200 million and US$250 million (about RM894 million and RM1.1 billion), with upfront payment from the client and the remaining equity portion to be funded internally at the JV level.

Despite the contract win, RHB Research expects minimal earnings impact, contributing approximately RM15 million or around 2% to Yinson's 2026 forecast but the contract win could propel future collaboration with Murphy Oil.

Murphy Oil, a new client for Yinson, is seen as a strategic partner, with potential for collaboration on future projects in other regions. This contract is the third project involving the JV firm PTSC, following prior projects utilising FSO Bien Dong and FSO Lamson.

The project has been valued at RM0.02 per share, based on the assumption of a US$200 million (about RM894 million) capex, a 10% project internal rate of return (IRR), and 7.5% weighted average cost of capital (WACC). The target price has been adjusted slightly to RM3.31, incorporating a 2% ESG premium, given Yinson's ESG score of 3.1. The target price of RM3.31 reflected a 72-sen premium over market valuation.

As at 3:07pm Dec 3, Yinson's stock traded at RM2.59. (Stock updates from Bursa Malaysia)

Looking ahead, RHB Research remains optimistic about Yinson's prospects, particularly in the floating storage and offloading (FSO) segment. The analysts expect FSO awards to return to historical levels of 10 vessels annually, from an estimated seven awards in 2024. Analysts anticipate that Yinson will secure 14 FSO contracts in 2025 and and 12 contracts in 2026.

Despite ongoing cost pressure, FSO contractors, including Yinson, are expected to maintain pricing power due to constrained yard capacity and robust demand.

However, RHB Research also pointed out potential downside risks, such as the inability to win new projects or the termination of existing contracts, which could negatively affect Yinson's growth trajectory.