YINSON has entered into an MOU with Brazilian independent Enauta for the supply and charter of an FPSO for the Atlanta field, offshore Brazil. We see this as a huge positive, with YINSON emerging victorious in a reportedly five-way race during the tender. Pricing in this new contract win into our SoP-valuations, we upgraded our call to OUTPERFORM and raised its TP to RM6.00.

MOU for Atlanta field FPSO. YINSON announced that it has entered into a binding memorandum of understanding (MOU) with Enauta Energia S.A. to engage in exclusive negotiations for the potential supply and charter of a floating production storage and offloading (FPSO) unit for the Atlanta field in Santos Basin, offshore Brazil.

Huge positive surprise. This is undoubtedly a huge positive, with the project progressing faster-than-expected, given earlier reports that the tender’s first-phase screening process was only concluded back in May 2021. Ultimately, this also provides some relief for YINSON after its bid for the Parque das Baleias project was terminated earlier. With the signing of this MOU, YINSON had emerged victorious in a five- way bidding race against: Canada’s Altera Infrastructure (formerly known as Teekay Offshore), Norway’s BW Offshore, Netherlands- based Bluewater and Brazil’s Ocyan.

Details on the FPSO charter. From what we gathered, the charter contract should be for a firm-period of 15 years, followed by 5 optional yearly extensions. Total contract value should be within the region of USD1.6-2b, with a final investment decision expected by early 2022, targeting beginning of production by mid-2024. Enauta has already pre-selected the OSX-2 FPSO to be redeployed for this project, which is understood to be eventually transferred to YINSON. The FPSO was originally built by SBM, and has been warm-stacked in the Singapore Strait since 2015. In terms of experience, YINSON has ample experience in FPSO redeployments following the success of Abigail- Joseph and Helang FPSO. Additionally, YINSON has also some related prior experience in working with the OSX-1 (sister vessel of the OSX-2), which was previously involved in the Ca Rong Do project, offshore Vietnam.

Upgrade to OUTPERFORM, SoP-TP raised to RM6.00 (from RM5.10 previously). Following the announcement, our TP is raised by ~RM0.90/share after including the FPSO charter into our SoP valuations, based on the assumptions of: (i) capex of ~USD500m, (ii) IRR of ~13%, (iii) discounting rate of ~6%, and (iv) firm-only charter period of 15 years. Our call is also subsequently upgraded to OUTPERFORM, from MARKET PERFORM previously.

Risk to our call: (i) project execution and delivery risks, (ii) refinancing risks, and (iii) termination of projects in its order or tender book.

Source: Kenanga Research - 30 Aug 2021