Investment Highlights

• We maintain BUY on Yinson Holdings (Yinson) with a higher sum-of-parts-based (SOP) fair value of RM4.30/share (from an earlier RM3.97/share), which implies an FY19F PE of 14x.

• While our forecasts are maintained, our higher fair value derives from a higher forex-driven DCF assumption for the group’s wholly-owned floating production storage and offloading vessel (FPSO) John Agyekum Kufuor (formerly named Yinson Genesis), of which a minor portion has been sold to a Japanese consortium at a valuation up to 18% higher than our earlier estimate.

• In July this year, Yinson has entered into a heads of agreement to sell a 26% equity stake in the US$1bil FPSO for a consideration between US$104mil and US$117mil, expected to be completed in December this year.

• With Eni’s final acceptance in early June this year of a Ghana-based FPSO, we expect the 2-month contribution from this project, which achieved first oil in May 2017, to boost 2QFY18 earnings. Hence, we also expect the group’s 1HFY18 results, likely to be announced on 28 September, to be in line with our forecasts.

• The group, which has recently sent up a multi-currency perpetual securities programme of up to US$500mil, is still currently exploring new projects.

• There is a strong likelihood that its 49%-owned joint venture with PetroVietnam Technical Services Corporation (PTSC) for the FPSO PTSC Lam Son may be securing an alternative charter in Vietnam.

• Recently, the Lam Son JV has accepted a letter of intent from PTSC to continue operations within the Lam Son Field, off Vietnam, effective 1 July 2017.

• Recall that PTSC terminated the original 7-year primary FPSO charter in April this year with an estimated fee of US$220mil as the Lam Son field’s production rate fell below expectations to 7,000 barrels per day. The termination fee mostly recovered the discounted cash flows of the outstanding bareboat charter and was in line with our own SOP estimate for this project.

• The group may also be eyeing a Hess-related FPSO project in Ghana, which could cost US$1bil, similar to the group’s earlier vessel for Eni. However, the visibility for the tender of this deepwater Tano-Cape Three Points (DT-CTP) project, within an ongoing maritime border dispute between the Ivory Coast and Ghana, is opaque at this juncture.

• Underpinned with locked-in earnings visibility from an order book of US$4.2bil (25x FY18F revenue), the stock currently trades at a bargain CY18F PE of 12x vs. over 20x for Dialog Group and Sapura Energy.

Source: AmInvest Research - 14 Sept 2017