Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with a higher sum-of-parts based fair value of RM3.97/share (from an earlier RM3.90/share), which implies a FY18F PE of 16x.

• Our higher valuation stems from a 26% increase in the NPV for the Ca Rong Do (Red Emperor) floating production storage and offloading (FPSO) vessel as its capex has been officially confirmed as US$648mil vs. our earlier assumption of US$500mil.

• This raises the Ca Rong Do FPSO's contribution to Yinson's SOP to RM394mil, or 36 sen from an earlier estimate of 29 sen.

• Yinson formally entered into a consortium agreement yesterday with PetroVietnam Technical Services Corporation (PTSC) to jointly undertake bareboat charter for FPSO for Repsol's Talisman Vietnam 07/03 B.V, targeted to commence in August 2019 after the vessel's conversion.

• We have moderated our WACC assumption to 6% as the Ca Rong Do project's debt-to-equity ratio will be 83:17 but conservatively lowered the project IRR from 12% to 11%, with the bareboat charter value expected to reach US$1bil including the 10-year firm period and 5 annual extension options.

• As Yinson's equity stake in the project will only be 49% vs. PTSC's 51%, the group's equity contribution will amount to US$54mil (RM235mil) - 7% of FY17 net debt, which will be raised from external borrowings.

• In a separate development, Yinson's wholly-owned Ghanabased FPSO vessel, named John Agyekum Kufuor, has achieved first oil 3 months ahead of schedule from its earlier deadline in August this year.

• Hence, we have raised FY18F net profit by 31% for the 8 months' additional earnings contribution vs. our earlier 5- month assumption. Our FY19F-20F earnings are unchanged as the US$1bil FPSO would already have been fully operational.

• Italy-based Eni, the operator of Ghana's Offshore Cape Three Points block with a 44% stake, has managed to commence production within a record 2.5 years from development plan approval. Together with the nearby Sankofa Main, Sankofa East and Gye-Nyame fields, the area has an estimated 770mil barrels of oil equivalent, of which 35% are non-associated gas.

• Given Yinson's locked-in earnings visibility with an order book of US$3.7bil (23x FY18F revenue), the stock currently trades at a bargain CY18F PE of 14x vs. over 20x for Dialog Group and Bumi Armada.

Source: AmInvest Research - 23 May 2017