Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with an unchanged fair value of RM7.20/share based on an ESGadjusted sum-of-parts valuation. This reflects a premium of 3% for our ESG rating of 4 stars given that the group is the first local oil & gas service provider to proactively invest into renewable energy, and implies an FY22F PE of 14x, 1 standard deviation below its 5-year average.

• Upstream reported that Petrobras has cancelled the retender of the Parque das Baleias (PDB) floating production, storage and offloading (FPSO) charter following months of negotiations after Yinson emerged as the sole bidder with a proposed day rate of US$645,750.

• Recall that Petrobras was tendering for an FPSO with processing capacity of 100,000 barrels per day of oil and 5 million cubic metres per day of natural gas for an integrated development plan to exploit 8 deepwater fields at Baleia Ana, Baleia Azul, Baleia Franca, Cachalote, Caxareu, Jubarte, Manganga and Pirambu.

• In Yinson’s first attempt in 2019, it was also the only qualified bidder which led to Petrobras cancelling that tender after over a year of negotiations due to Covid-19-induced economic difficulties.

• We are mildly negative on this development as the group’s SOP/share could have been slightly diluted by 8 sen or 1% from a potential RM1bil rights issue (assuming at a 30% discount to current share price) to partly finance the vessel together with additional renewable projects.

• Our forecasts are unchanged as we have not incorporated any contributions from PDB. Meanwhile, the group is still tendering for FPSO charters for the Limbayong offshore fields, off Sabah and Greater Pecan, off Ghana. Nevertheless, Upstream reported that Oslo-listed Ocean Yield appears to have the edge over Yinson for the Pecan tender in Ghana.

• Meanwhile, Yinson together with Technip Energies are undertaking pre-front-end engineering and design (FEED) services for Total Energies for two large FPSOs to be deployed in Block 20/21, Angola and Block 58, Suriname. While separate bids will need to be later submitted for the FPSO charters, the FEED job positions Yinson onto a stronger competitive position vs potential rivals.

• Additionally, Yinson could also be participating in Eni’s charter for a large FPSO with a production capacity of 120K barrels per day for the deepwater Agogo field, off Angola. Hence, we believe the group is still well positioned to secure new projects over the longer term given the limited number of FPSO players currently amid rising demand for such vessels globally

• The stock currently trades at a bargain FY22F PE of only 9x vs. a 5-year average of 21x for a globally recognised FPSO player with a healthy balance sheet and visible prospects of substantively expanding its already formidable outstanding order book of RM40bil (US$9.7bil), which translates to a robust 13x FY22F revenue.

Source: AmInvest Research - 23 Aug 2021