- We maintain our HOLD call on Yinson Holdings (Yinson) with an unchanged sum-of-parts based fair value of RM2.97/share, which implies an FY16F PE of 24x and EV/EBITD (Enterprise Value/Earnings Before Interest, Tax & Depreciation) of 13x –a 20% premium to Bumi Armada’s 10.5x.

-  Yinson announced that the charter of its wholly-ownedfloating production storage & offloading vessel (FPSO) Knock Adoon has been extended by its client Addax Petroleum Development (Nigeria) Limited (Addax) by a year from 17 October 2014 at a value of US$39mil (RM127mil).

-  The charter extension is 9% higher than the group’s fixed charter rate of US$36mil, and 8% higher than its earlier estimated optional 8-year contract value of US$289mil.

-  Recall that the original contract for the FPSO was awarded on 17 October 2006, for a firm 8-year period, which expired last month.

-  We are not surprised that Addax renewed its charter for FPSO Adoon, as the field is operating well within expectations, producing 52,119 barrels of oil per day (bopd) in 2013 vis-à-vis the vessel’s capacity of 60,000 bopd. Our SOP already assumes that Addax will fully exercise the FPSO’s the remaining 7-year options.

-  While this charter extension appears higher than our earlier estimates, we maintain our forecasts for now pending further guidance from management.

-  Catalysts for the group stems from additional FPSO contracts which the group is currently bidding in West Africa and Southeast Asia. Management indicated that the result of a large FPSO tender is likely to be revealed by the end of the year while the small to mid-sized projects would be known next year.

-  Recall that the group has recently signed a MOU with Golden State Petro to buy a Samsung-built 309,000DWT very large crude carrier Ulriken, which was built in 1998.

-  The FPSO is likely earmarked for the Sankofa-Gye Nyame field under the Offshore Cape Three Points (OCTP) licence at offshore Ghana, which was being bid for by Yinson, Tokyo-based Modec, and Bumi Armada.

-  The share price has retraced by 10% over the past three months, but Yinson’s valuations are fair at FY16F EV/EBITDA of 11.5x, which is at a 10% premium to Bumi Armada’s 10.5x.

Source: AmeSecurities