Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with an unchanged sum-of-parts-based (SOP) fair value of RM5.53/share, which implies an FY21F PE of 14x.

• As indicated in our earlier report, we maintain our forecasts after the analyst briefing today. These are the salient highlights from the meeting:

• The Helang FPSO conversion (formerly Layang) of the Four Rainbow vessel is on track in China, almost concluding phase 1 with completion scheduled by October next year. Recall that Yinson has novated the former Layang FSPO charter from TH Heavy Engineering on 1 June this year.

• Yinson expects to finalise the charter arrangement with First Exploration and Production Development Ltd (FEP) and Nigerian National Petroleum Corporation soon. Pending negotiations on client guarantees, Yinson has an option to purchase an existing FPSO for the Anyala and Madu fields. Expected to upgrade the vessel on a fast track basis, this project could secure higher IRRs than the larger John Agyekum Kufuor (JAK) FPSO in Ghana. Recall that Yinson has entered into an MoU with FEP to secure a 100% equity stake in the bareboat charter and 40% in the operation and maintenance services.

• Management expects the tender results for Eni’s FPSO to be deployed in the Amoca field, off the Gulf of Mexico by the end of this year. Mexican regulators have recently approved Eni’s US$7.5bil plan for a development at the fields of Amoca, Mizton and Tecoalli, which is expected to reach an output of 90,000 barrels per day by late 2020 via an FPSO which could cost up to US$1bil. Other contenders are Modec and Bumi Armada.

• The tender results for Petrobras’ 3 FPSOs — the Parque das Baleia, Marlim 1 and Marlim II, which have no local content requirements — could materialise next year. Given that the capex could range from US$700mil-US$1bil for each vessel, Upstream

indicated multiple bidders could be Yinson, Modec, SBM Offshore, Blue Water, Teekay Offshore, Bumi Armada, Saipem, National Oilwell Varco and MISC.

• The FPSO tender for the Deepwater Tano-Cape Three Points (DT CTP) block off Ghana may materialise by late 2019 as Hess sold its 50% operating stake in block to Norway-based Aker Energy. Bidding against Modec, SBM Offshore and Bumi Armada, the capex of this VLCC-sized vessel could rival Yinson’s JAK FPSO.

• Against the backdrop of the rising momentum of global project rollouts, Yinson group remains hopeful of securing at least another FPSO potentially costing US$1bil over the next 12 months given the multiple developments in Brazil, West Africa and Mexico amidst a limited pool of contenders with the necessary track record and financial capability following the severe industry downturn over the past 3 years.

• With a comfortable net debt/EBITDA of 2x which precludes any immediate equity raising exercise, the stock currently trades at a bargain FY19F PE of 17x vs. over 20x for Dialog Group and Sapura Energy.

Source: AmInvest Research - 25 Sept 2018