News     Yesterday, YINSON announced that it had fixed the price at RM2.82/share for the proposed 10% private placement exercise. This will raise cash proceeds of RM56.5m

The exercise will lift its share base to 220.4m shares, from 200.4m currently. 

The placement exercise is to raise funds for potential new businesses and/or to pare down its debt.

Comments    We are surprised by the announcement as we have not heard of any potential wins in the near term. We understand YINSON is keen to add at least one new project every year and it would likely be within the floating production vessel space.

We believe that any funds raised will be channeled straight to fund the equity needs of new projects, which will leave its net debt position relatively unchanged.

We estimate the private placement will lead to potential interest cost savings of RM1.6m per annum and FY13-14 EPS dilutions of 7.7% and 8.2% respectively.

Outlook    In the long run, we are positive on the company as its earnings growth trajectory is accelerating.

The company is looking to kick start its FSO operations in early FY14 and FPSO operations in FY15.

Its strong links to PTSC are a precursor to more Vietnamese opportunities.

Forecast    We are increasing our share base to 220.4m shares.

We are also increasing our FY13-14 net profit estimates by 1.4% and 1.0%, respectively, but the new shares will dilute its FY13-14 EPS numbers by 7.7% and 8.2% as highlighted above.

Rating  Maintain OUTPERFORM

Valuation     Given that the cash raised is accretive to our FY15 SOP-based target price, we are increasing our target price slightly to RM3.83 (from RM3.81 previously).

Risks    1) Significant reliance on Petrovietnam poses an earnings risk to Yinson, 2) high capex requirements and 3) contractual and project execution risks in new projects due to its inexperience.

Source: Kenanga