Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with an unchanged fair value of RM7.20/share based on an ESG adjusted sum-of-parts valuation. This reflects a premium of 3% for our ESG rating of 4 stars given that the group is the first oil & gas service provider to proactively invest into renewable energy, and implies an FY22F PE of 15x, on par with the FBMKLCI.

• Our forecasts are maintained following an analyst briefing yesterday which provided details on the group’s minority investments in 2 Singapore start-ups: 1) Oyika, which provides electric motorbikes (e-bikes) and battery swap services via affordable subscription plans in Southeast Asia; and 2) MooVita, a provider of autonomous vehicle (AV) solutions.

• Oyika, which has deployed 100 e-bikes each in Indonesia and Cambodia since last year with back orders of 30K at this stage, has ambitious aims to reach a target of 4K this year, 40K in 2022 and 126K in 2023 through partnerships with ride-sharing and delivery platforms such as Grab and GoJek.

• The value proposition for Southeast Asian urban motorists stems from Oyika’s attractive all-in costs of an e-bike of US$70/month in Indonesia and US$100/month in Malaysia. These include unlimited battery swaps in which subscriptions in prepaid and postpaid options are modelled on mobile cellular plans.

• MooVita is currently the only AV provider with a permit in Malaysia and amongst 3 operators in Singapore. This company, still loss-making, started operations in 2016 and presently focuses on transport operators and OEMs such as Proton as well as tractors for the agricultural sector in China.

• Yinson has invested half of its budget of US$20mil (1.5% of market cap) earmarked for green technology start-ups. However, given that the group will initially own undisclosed minority stakes in Oyika and MooVita, we do not expect any significant erosion to the group’s FY22F earnings at this juncture. Nevertheless, we are neutral on these investments which could supports our ESG rating of 4 stars for Yinson.

• Meanwhile, the group is awaiting the results for 3 bids submitted for the floating production, storage and offoading (FPSO) charters for Parque das Baleias (PDB) field in Brazil, Pecan in Ghana and Limbayong in Sabah.

• Yinson expects an announcement by September–October this year for the PDB bid with the group again emerging as the sole bidder from Petrobras’ re-tendering exercise. Together with renewal energy prospects, the group expects to undertake a rights issue of up to RM1bil, 18% of current market cap.

• Assuming a capex of US$800mil and conservative project IRR of 12%, PDB could add 17% to Yinson’s current DCF. However, if Yinson proceeds to undertake a rights issue of up to RM1bil at a 30% discount to current share price, we estimate a marginal dilution of 0.5% for SOP/share.

• Meanwhile, Yinson, together with Technip Energies, have been selected by Total to perform preliminary front-end engineering design (pre-FEED) for 2 FPSO projects to be installed in Block 20/21 in Angola, Africa and Block 58 in Suriname, South America. Including Yinson, 2–3 contractors were selected to undertake this job that will allow Total to choose the best engineering design which could lead to the winner securing the FPSO charters involving substantive vessel capex of RM1bil–RM1.5bil each.

• Yinson is also eyeing 4 more FPSO projects and remains on the prowl for additional RE projects. As it could opt to recycle RE capital later at lower interest costs post-development, we remain sanguine on Yinson’s energy transition strategy that is well ahead of its peers and should garner ESG-supported premium valuations over the longer term against Tesla’s forward PE of over 600x. When its 80%-owned Nokh Solar Park project in India with a capacity of 190MW commences in April 2022, Yinson expects the carbon credits generated together with its 95% stake in the 140MW Bhadla Solar Park II to be sufficient to offset the emissions from the group’s existing vessels, excluding the Anna Nery FPSO scheduled for completion in 2Q2023.

• The stock currently trades at a bargain FY22F PE of only 10x for a globally recognised FPSO player with a healthy balance sheet and a formidable outstanding order book of RM41bil (US$10bil), translating to a robust 13x FY22F revenue.

Source: AmInvest Research - 17 Jun 2021