Petrobras has finally awarded YINSON with a letter of intent for the Parque das Baleias FPSO, after multiple back-and-forth on the project’s status previously. The contract is for 22.5 years, starting in 4QCY24, with an expected charter rate of ~USD624k/day – bringing total contract value to over USD5b. Moving forward, we are expecting a rights issue of ~RM1b to follow in order to part finance the equity portion of the project’s capex. Reiterate OUTPERFORM call, with no changes to our SoP-TP, as the contract win was already well-anticipated and had already been factored into our valuations.

Parque das Baleias FPSO finally awarded. Petrobras announced that it signed a letter of intent with YINSON for the chartering and provision of the Parque das Baleias (PDB) FPSO, to be installed in the Jubarte Field located in the northern part of the Campos Basin. The contract is for a duration of 22.5 years, with production scheduled to start in 4Q CY2024.

Positive on the award. We are positive on the PDB contract being a step closer towards finalisation after repeated back-and-forth between YINSON and Petrobras on the project’s status. We expect charter rates to be ~USD624k/day, thus translating to a total contract value of over USD5b. This would be YINSON’s third FPSO within the region after FPSO Anna Nery and the Atlanta field FPSO.

Rights issue expected to come. Following the contract award, we are expecting a rights issue of at least ~RM1b to come in order to part finance the equity portion of the project’s capex.

Reiterate OUTPERFORM, with no changes to our SoP-TP of RM7.35, as the PDB contract win has already been well anticipated. We have already included the contract win into our SoP 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.

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

Source: Kenanga Research - 15 Nov 2021