Investment Highlights

• We maintain our BUY recommendation on Yinson Holdings (Yinson) with an unchanged sum-of-parts based fair value of RM7.20/share, which implies an FY22F PE of 18x.

• Our forecasts are unchanged as we have not incorporated any contribution from Petrobras’ re-tendered charter of a floating production, storage and offloading (FPSO) vessel to be deployed at the Parque das Baleias (PDB or Whale Park) revitalisation field in the Campos basin, off Brazil.

• Last week, Petrobas cancelled the earlier PDB tender while authorising a new bidding process with an unchanged project scope to reduce the costs by opening it up to more competition. Recall that Yinson was expected to secure this tender as the company was the only remaining bidder. These are the salient highlights of the virtual analyst briefing today:
   
  • The new bid is likely to open next month with an award likely by mid-2021 for the commencement of the PDB FPSO to be rescheduled by a year to the end of 2024.
     
  • As VLCC size of the FPSO is unchanged, Yinson does not expect substantive reductions to the estimated capex of US$1bil, which was already lowered in the earlier bid during direct negotiations with Petrobras over the past months.
     
  • The bidding cost of below US$10mil is likely to be capitalized for the new bidding process for PDB as Yinson has completed the engineering design and costing process. Hence, the group is unlikely to incur any impairment provision from this development as this stage.
     
  • Besides PDB, Yinson is also looking at a charter from Brazilbased independent Enauta to provide a VLCC-sized FPSO in the Atlanta deepwater heavy oil field in the Santos basin, off Brazil. A tender is likely to be opened in 3QFY2021 with an award by end-2021.
     
  • In Malaysia, Yinson is eyeing at a re-tendered FPSO charter for the Limbayong field, off Sabah which is likely to be awarded in 2QFY21. While the capex could be reduced to US$600mil from US$700mil from the revised project scope, Yinson may bid for the charter alone instead of partnering with MISC in the earlier tender.
     
  • The group remains on the prowl for additional renewable energy projects, hoping to expand its portfolio by 500MW to 1GW from a 95% equity stake in a 160MW plant in Bhadla Solar Park II, Rajasthan India. This could mean additional investments of up to US$100mil, of which Yinson is likely to source from external borrowings.

Source: AmInvest Research - 19 Oct 2020