Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with unchanged forecasts and 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 currently.

• As what we have been guiding over the past months, Upstream reported that Yinson Holdings, still owning the 300,000mt VLCC Hawk (formerly Apollonia), is now poised again to supply Petrobras with a mid-sized floating production, storage and offloading (FPSO) vessel for the Parque das Baleias (PDB) field in the Campos basin.
• Recall that Petrobras had ruled out Yinson, the only bidder, for re-tendering outside budget parameters in August this year with indications that the second tender was going to be terminated without success.
• However, Petrobras has reversed its decision. It is now negotiating with Yinson, and the two parties are understood to be close to signing a letter of intent for the charter.

• Upstream indicated that Yinson has agreed to a 3% discount to a flat day rate of US$624,110 from an earlier proposed US$645,750 in May this year, which was deemed too high by the Petrobras bidding committee.

• Petrobras intends to charter an FPSO over 22.5 years with a storage capacity of 1mil barrels of crude, processing capacity of 100,000 barrels per day of oil and 5mil cubic metres per day of natural gas for the development. The unit is expected to feature a total of 21 development wells, including 14 oil producers and seven water injectors.

• While tentatively scheduled to begin operation in 2024, Upstream indicated that the commencement could be extended by another year to address delays in the awarding of the contract.
• Separately, Yinson's MoU with Brazil-based Enauta Participacoes S.A. for a direct and exclusive negotiation to supply an FPSO is expected to reach a firm contract by January next year, with potential conversion costs of up to US$500mil to the Atlanta field in the Santos Basin, offshore Brazil. Assuming a conservative project IRR of 12%, the Enauta FPSO could add 7.5% to Yinson's current SOP.

Source: AmInvest Research - 28 Oct 2021