Petrobras is reportedly back in talks with YINSON for the charter of Parque das Baleias. This came as a positive surprise, as we now expect an official contract award in the next couple of months (barring further delays). The landing of a new large-size FPSO contract would necessitate a fund raising exercise of ~RM1b in order to part-finance the equity portion of the project capex. Maintain OUTPERFORM, as we raise our TP to RM7.35 (from RM6.00) after including a new win assumption and a 15% share base enlargement from a potential fund raising exercise.

Petrobras revives PDB project. Upstream reported that YINSON is back in the race for Petrobras’ Parque das Baleias (PDB) FPSO project in the Campos basin, with the two sides reportedly close to signing an agreement for the charter contract. This is mildly surprising, with tenders for the project terminated twice – with YINSON being the project’s sole bidder in both rounds, as prices submitted were outside of budget perimeters.

No changes in specifications from the last round. We believe specifications should all remain the same compared to the last round of tender, with day rates at USD624k for a 22.5-year charter tenure. Considering a tentative start date in 2024, we believe an official contract award will come in within the next couple of months (barring further delays).

Rights issue to raise ~RM1b. If this large-size FPSO contract materialises, this would necessitate a potential rights issue to raise ~RM1b to part-finance the equity portion of the project’s capex.

Reiterate OUTPERFORM, with a higher SoP-TP of RM7.35 (from RM6.00 previously), after we included a new large-size FPSO contract win into our valuations, based on the assumptions of: (i) capex of ~USD1b, (ii) IRR of 14%, (iii) discounting rate of 7%, and (iv) 100% stake. Additionally, we have also included a 15% share base enlargement into our valuations to account for a potential rights issue exercise.

Note that our valuations have yet to take into account contributions from its renewable energy and green technology ventures, which we believe could serve as long-term re-rating catalysts.

Keen investors should also take note of the counter’s potential falling out of the shariah compliance list in the upcoming November 2021 review.

Risk to our call: (i) failure to secure new contract, (ii) project execution risks, (iii) refinancing risks, and (iv) termination of existing order book.

Source: Kenanga Research - 29 Oct 2021