RHB estimates Agogo FPSO project to bring in RM200 mil annual net profit, should Yinson bag it

KUALA LUMPUR (Sept 8): Should Yinson Holdings Bhd secure the Agogo floating production storage and offloading (FPSO) vessel contract from Italy's Eni, it will add an estimated annual net profit of RM200 million to the group, according to RHB Research.

"If the deal is struck, we estimate and conservatively suggest a 22 sen increase to our TP (target price)," RHB Research analyst Sean Lim wrote in his note.

Lim, who has a "buy" recommendation for Yinson, currently pegs his TP at RM2.83. At the time of writing, Yinson's share price was up four sen at RM2.31, with a market capitilisation of RM7.05 billion.

Based on preliminary calculations, Lim believes that the project could be worth 22 sen per share, which is 8% of his TP. His valuation is based on assumptions of US$1 billion (RM4.5 billion) capital expenditure (capex), 15-year charter period, 10% project internal rate of return (IRR), 7.5% weighted average cost of capital, 80% debt funding, and 100% equity stake.

"Every 1% increase in IRR would lift our TP by six sen. The impact on the bottom line is estimated at RM200 million per annum (24% of financial year 2025 forecast earnings)," he added.

"The downside risk would be further contract termination and weaker-than-expected operating uptime for existing vessels," Lim said.

Oil and gas publication Upstream, citing sources, reported that Yinson has emerged as a front runner for the engineering, procurement, construction and commissioning contract that will deliver an FPSO vessel for Eni's Agogo project, in offshore Angola.

According to the article, Eni will sign a letter of intent with Yinson imminently, with a commercial contract likely to be finalised later this year. The article also noted that the floater is required for a period of up to 20 years.

The FPSO is designed to produce 120,000 barrels of oil per day and store about 1.6 million barrels for the full-field development — Agogo's second development phase. First oil from the new deep-water project is expected to flow in 2026.

RHB Research's Lim said there is a lack of project details but there would be positive growth prospects. He anticipates that the capex for this project could be at least US$1 billion.

"Yinson could be expecting a certain upfront payment from the client (ie cover vessel cost) as part of the terms and if the deal is sealed by end of this year, a 36-month conversion period would be in time to achieve first oil by 2026," Lim commented.

Lim highlighted that the project win has yet to be inputted into their TP of RM2.83. His current "buy" recommendation is based on Yinson's aggressive venture in renewable energy and green technology business.