CEO Morning Brief

Yinson’s Move to Rope in Foreign Partners for Unit Is Timely, Will Strengthen Balance Sheet, Analysts Say as Shares Rise

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Publish date: Thu, 16 Jan 2025, 09:59 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Jan 15): Yinson Holdings Bhd’s (KL:YINSON) move to rope in foreign partners for its production unit would strengthen its own balance sheet and reduce the reliance on debt, analysts said.

Investors also reacted positively to the news of the capital injection totalling US$1 billion (RM4.51 billion) from an Abu Dhabi-led consortium, sending Yinson’s shares to their highest in one month as trading resumed on Wednesday.

Post-funding, Yinson will have “greater financial stability,” CIMB Securities said. Channelling the proceeds to its floating production, storage, and offloading (FPSO) unit is also “perfectly timed”, given the robust market outlook, it said.

On Tuesday (Jan 14), Yinson announced that Abu Dhabi Investment Authority (ADIA), together with funds managed by Canada-based British Columbia Investment Management Corp and RRJ Group of Singapore, will subscribe to redeemable convertible preference shares and warrants issued by Yinson Production.

Most of the proceeds will go towards supporting the unit’s growth in the FPSO business, and US$200 million will accrue to Yinson. Debt, as a proportion of shareholders’ equity, will fall to 0.7 times, from 1.3 times, once the deal is completed.

The deal values Yinson Production’s FPSO business at an enterprise valuations of 8.5 times, higher than the peer average of 6.5 times, which reflects investor confidence in Yinson’s FPSO expertise and growth prospects, according to Kenanga Investment Bank.

Shares of Yinson rose as much as 11 sen, or a little over 4% to RM2.81, their highest since Dec 9, 2024. At that price, the company has a market capitalisation of over RM9 billion. The stock had risen about 7% last year, and up about 6% in the first two weeks of 2025.

Analysts remain bullish, with all 10 covering Yinson maintaining a “buy” call. The consensus 12-month target price is RM3.64, implying a 32.8% upside from the current price, according to Bloomberg.

“We are overall positive on Yinson’s latest funding exercise, as it allows the group to pursue new projects without immediate dilution, while unlocking its value,” said RHB Investment Bank.

Source: TheEdge - 16 Jan 2025

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