- We maintain our BUY call on Yinson Holdings (Yinson) with an ex-rights fair value of RM6.25/share (with a cumrights price of RM10.30/share), based on a sum-of-parts (SOP) valuation, which implies an FY15F PE of 23x and EV/EBITD (Enterprise Value/Earnings Before Interest, Tax & Depreciation) of 14x - comparable with our current valuations for Bumi Armada.

- Upstream reported that Tokyo-based Modec has emerged as the favourite to secure Eni’s floating, production, storage and offloading (FPSO) charter for the Sankofa-Gye Nyame field under the Offshore Cape Three Points (OCTP) licence, offshore Ghana.

- The contract is due to be announced within weeks with at least three contractors officially in the running for the award but Modec appears to have the edge against the other two players, Bumi Armada and Yinson, which we had earlier thought was likely to secure this contract.

- This Ghana FPSO is expected to cost US$700mil-US$800mil – significantly larger than the US$450mil cost for the group’s 49%-owned Lam Son FPSO, currently still under conversion in Keppel yard, Singapore.

- If Modec secures this charter, it would be the third consecutive FPSO contract in Ghana which has been secured by the company - continuing its dominance of the country's floater sector. Modec had previously secured the FPSO contracts for Tullow Oil's Jubilee and Tweneboa-Enyenra-Ntomme projects.

- This OCTP FPSO, to be moored in 1,000-metre depth waters, will be able to handle more than the expected output of Sankofa-Gye Nyame which, at its peak, is forecasted to produce 160 million cubic feet per day of gas and 50,000 barrels per day of crude.

- Eni, the operator, aims to fast-track Sankofa-Gye Nyame towards producing first oil in late 2016, with gas flowing one year later. This Sankofa-Nye Gyame project may need a dedicated gas line of at least 55 kilometres in length to export gas from the FPSO to the coast.

- This FPSO contract currently accounts for 28% of our SOP valuation for Yinson. Unless another significant FPSO contract emerges in the near term, the loss of this charter could cause our SOP to drop from RM6.25/share to RM4.52/share.

- But for now, we maintain our earnings and valuations pending further developments on the group’s other tenders in Africa and Vietnam. Despite outperforming the FBMKLCI by 154% over the past year, valuations are still decent at FY15F EV/EBITD of 7.9x compared to Bumi Armada’s 14.1x.

Source: AmeSecurities