Investing theory 4 - Mr Market

YINSON - endgame when oil hits USD120 per barrel

Good day all,

My name is Philip. For those who have followed my investment portfolio posted publicly online, one of the biggest portions of my portfolio is in PCHEM, which as time has passed by is definitely doing well over the last 3 years (44% up since my last time buying, with a average investment of 17 million, market value of 25 million today, and 2 million in dividends received).

so, in all fairness, for a safe boring stock very good, with more growth to come.

However, as neglected as it is, my second largest investment holding is actually in Yinson, which is  21% of my portfolio, and 11.6 million ownership. Sadly, the growth over the last 3 years has been quite slow, due to a few challenges faced by yinson. (delay of order, cancellation of projects). However, I believe it will soon be about to change.

Let me set the stage.

Notice how the orderbook ties up very nicely with the revenues of the company. And how they are investing the extra cash into new FPSO projects around the world.


GUESS what will happen in 2023, and 2024? DO YOU HAVE THE PATIENCE TO INVEST IN THE STOCK MARKET? 


DEC 2021

NOV 2021

Just by listening to the interview above we come to a few very clear basic details. CY Lim is a very conservative and safe manager, not taking bad deals, and geting the highest charter rates in the market. They have 99% production uptime, a long 26 year history of success (including their fred olsen norweigen acquisition), and use that to build on their value proposition in picking up long term FPSO contracts at very good rates.

And now based on their history of success, their ability to grow capital and their project pipeline, we now see a 15.33 billion USD (60 billion ringgit) FIRM orderbook with a call option to increase that to 16.8 billion that lasts all the way until 2048 (25 year contract for petrobras). Having an orderbook that long can be bad and good, bad if managed improperly ( like armada north sea project), good if managed properly (huge penalty for early cancellations, huge clarity of long term growth).

that 60 billion ringgit order book, if yinson does nothing with it (ignore their india 190MW solar farm project at nokh which costs around 300m to produce, with a 1.5 billion 25 year PP agreement, on top of their existing 140MW bhadla solar farm at the same area which cost them 25 million usd to purchase,, yinson will be looking at a 50% gross profit margin, or 30 bil ringgit, more than enough to pay for the loans and bills taken up in the past few years (7billion+ and counting). For a steady and boring energy like yinson, clarity of cash flow earnings is the most important thing for investors like me. (please note all the numbers are guesstimates and not exact to the dollar, although the contract details are open for the public to see).

So we come to this: they are raising 1.22 billion, to pay for the new fpso enauta, maria and anna nery completion in 2023/2024. The last time they had a rights issue, this is what happened:

They completed 4 FPSOs and grew profits from 40 million a year to 400 million. Market cap jumped almost 100 fold over the last 12 years, and the business itself became the 6th biggest FPSO company in the world.

Today, they are asking for more, and willing to have rights issue to go along the ride.

I will definitely be putting in more money in this.

For me at my age and risk appetite, I much prefer putting money into a business that has an orderbook 25 years into the future (fixed rate for solar farms, fixed rate for FPSO charter) where I know exactly how my cash flow is coming, how much is going, where it is coming from and how it is being spent. YINSON, QL, PCHEM, HARTA all offer very clear long term prospects in terms of production clarity (with clarity going up 5-10 years ahead on production figures, as their capacity is always driven by demand). As such, they are becoming more vertically integrated, with long term growth and huge cash warchest to build on their moat.

boring business indeed.

The simple fact is investing in FPSO, there is a ship conversion time of 2 years. So basically, any contract that is procured and agreed upon today, takes 1 year to confirm, and another 2 years to deploy, before you see the ongoing results. Its a bit like building oil rigs, except movable and reusable. So like how CY lim says it, todays work will only be seen 2- 3 years from now.

I have been a shareholder in yinson since 2012, and have held on buying recently since 2019 due to the cancellation of the FPSO contracts from south american players due to the oil price uncertainty. However now with the oil price as it is today, it is definitely a compelling time to start buying the O&G players.

However, do you buy those cyclicals and bottom end players like sapura, armada, or go to the speculative ones like dayang, hibiscus, carimin with their non fixed orderbook? or go to the spread players petron, hengyuan etc?

For me the rules are still the same. Find the companies with strong cash positions, have good profits in bad times, and good profits in good times, nothing too speculative, vertically integrated, long orderbooks and a history of outperformance.

Dialog, Pchem, yinson, petgas, dagangan, those are all asking for a fair price in this market cycle, with a good backup support. For me, yinson is what I understand best, as it is a very very simple business at heart.

Just FPSO charter of USD500K per day. 5 year - 25 year contract.

O&M optional, but sold separate and only for good contract prices.

Fixed earnings, fixed profit margins that depend on having a high uptime length. Good management, professionaly managed (not by skin color but by performance capability).

My Favourite type of company,

This is the easiest part, take each FPSO, find the uptime, the contract period, the length of time, the contract type (O&M, or bareboat charter only), times with the duration, and that is your clear cash flow moving forward. Just like how you would buy a bus/lorry, and calculate how much money you can make per trip, and times per year. Simple, easy calculations. And with their 26 year history of dependability and the risk of accidents being low due to good management, you will know exactly how much money Yinson will make in the next 10-20 years. IF they don't reinvest the profits into more renewables, FPSO contracts, and other profitable projects. Who knows what the young man with full support from his family will do next?

You can see from the way he talks, his proven actions, his ability in getting profitable contracts, and his long term strategy that he has plan, he is working along that plan, and he is not doing silly things that would ruin his fathers legacy. Just the kind of manager you would want working under you.

For those who were wondering why I bought Yinson many years ago in 2012, this was why.


I was driving to westports, and was listening to this bfm broadcast on the radio. I managed to find it again many years later on the BFM website, and I think his character and his strategy for the company still remains the same. I find it refreshing that he hasn't changed much, and I would be plying more investments into yinson once I have more news of his impending rights issue.

Good things to see for the future post contract.

Hope everyone makes a good profit this year and for many years ahead,

Always buy what will go up tomorrow!

Captain Philip Enauta


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1 person likes this. Showing 22 of 22 comments

Philip ( buy what you understand)

Is yinson a oil services unicorn? I think so, from the last 12 years since 2010, yinson has been a 100x company. imagine that for a malaysian company that not many people even realizes exists but can compete on the world stage.

2022-02-07 11:51


armada much better with pe5 only

2022-02-07 17:39


Do anyone sincerely believe a USD 120 per barrel oil is sustainable and desirable?

Do you know what is the cost for those land based oil production cost?
And what happen if these producers decide to open their tap to flood the market with oil?

Winter will be over soon and oil demand will tapper off.
So dream on the USD 120 per barrel oil.

Will new renewable energy take over fosil fuel in the future? The answer is not if but when.

2022-02-07 18:01

Philip ( buy what you understand)

What is armada order book?

ITreeinvestor armada much better with pe5 only
07/02/2022 5:39 PM

2022-02-07 21:29



I think in 1997 it was USD10 per barrel, or around there if i am not mistaken. Inflation will make sure oil will be USD100+ in the coming future, when? I dont know, 10 years from now? 20 years from now? who knows. it is going up for sure.

2022-02-07 21:58

Philip ( buy what you understand)

Oil price sudden spike is not only because of oil demand but also due to shortage and disparity between supply and demand.

Winter will be over soon and oil demand will tapper off.
So dream on the USD 120 per barrel oil.

2022-02-07 22:19


Under investment in the oil industry leads to reduced production of oil.

So, USD 120 per barrel oil can become a reality in future.

2022-02-07 22:25

Philip ( buy what you understand)

Yes, it takes time to restart productions and bring in drilling crew. In the meantime, those who are in the business will be enjoying huge earnings.

2022-02-07 22:34


Bankers are no longer supporting the oil industry. They prefer clean

energy like solar n electricity.

Oil / petrol powered vehicles are slowly been phased out.

2022-02-07 22:40



oil production costs is a magical question

what is fixed is Exxon Permian costs USD30.00 per barrel
its land based so costs are flat lined

what is low is Saudi USD0.50 ex-well head costs. Saudi has huge social costs becoz 1 guy has 4 wives and 150 children, all not working and all paid a monthly amount by Govt.
[btw Malaysia wants to benchmark them in this no work got money matter too]
Long story short Saudi needs USD65 to 75 to make budget positive, so this becomes their oil production costs.


Sslee Do anyone sincerely believe a USD 120 per barrel oil is sustainable and desirable?

Do you know what is the cost for those land based oil production cost?
And what happen if these producers decide to open their tap to flood the market with oil?

Winter will be over soon and oil demand will tapper off.
So dream on the USD 120 per barrel oil.

Will new renewable energy take over fosil fuel in the future? The answer is not if but when.
07/02/2022 6:01 PM

2022-02-07 23:37


All the shale gas projects in US is reactivating at today’s oil price . I seriously doubt OPEC wants to see oil price above $100 for too long to encourage competition from shale.

2022-02-08 05:51


Bear in mind Oil market is always very cyclical and political.

2022-02-08 05:52

Philip ( buy what you understand)

I personally believe shale as an industry does not work as the associated costs are far too high. Maybe once middle East production reduces.

2022-02-08 07:37


It is widely reported Shale oil production cost is USD35 - USD60 varying between producers. Opec once said in few years ago that oil price should be USD60 to thwart surge of shales production.

2022-02-08 07:53

Philip ( buy what you understand)

Here is where we look at safety, do you buy bumi armada with a history of delays in FPSO uptime and lawsuits with clients on non production? They do have a firm order book of 15 billion ringgit, however their cash position is weak and will not be able to bid for more big jobs( I suspect FEED will go to yinson), meanwhile they are only recently out of the woods with there current contract oil price.

Meanwhile you have yinson which is double the market cap, yet they have 4 times the order book at 15 billion USD, a long history of completing their projects on time and on schedule, and most important they are linking with all the big clients with good payment.

Who will you choose? I know where my line in the sand is drawn.

2022-02-08 08:30


Hi Philip. Well written as usual and it shows how much time you have spent on your investment.
However, please enlighten me how is Hibiscus speculative stock? I am sure you have got basis? With oil price USD120, producers are the first to benefit. Especially so if the oil price could sustain. As you highlighted, any FPSO secured would be 3 years down the road. So, any new projects won't be materialised till 2025-2026 earliest. I have read up about investments in oil & gas going forward. The world at best gonna replaced the depleted production. Meaning that this is indeed a matured industry. Petronas, Shell etc not gonna produced more oil but they still can benefit from better prices. The only benefits services providers in O&G can get is by increased service rates (if any).
Is Yinson under valued? I don't know. Let's just highlight the risk.
1. Many FPSO contracts are about to expired. Extension is an unknown.
2. The long tenure FPSOs both from Brazil and yet to show profit.
As for renewable energy Yinson got into, what's the IRR? With my limited knowledge, i know energy companies go for RE to please the green activists and not on investment logic. It's like asking loan shark to put money in FD.
Last but not least, about half of the rights issue is for payment of bank borrowings. The articles claimed interest savings of RM22m, so i guess the loan interest around 4%? So now, since the FPSO returns are so high, what logic is there to repay bank borrowings with equity?
Being in business, i only repay loan when i can't utilise my equity for high returns or i have max my loan limits?

2022-02-08 13:13


Yinson is insolvent and technically bankrupt like Serba

Get out of this sinking ship

2022-02-08 17:16


Yinson Debt Bomb has ballooned to over Rm7 Billions (more than twice that of Serba)

Now asking for "SOS" From shareholders' help by so much Rm1.22 Billions in a time when many have exhausted their investment capital and looking forlornly for some dividends instead

Looks like Yinson's troubles will be a burden to shareholders

What still want to ride this "dead" horse?

As they said, "If you know the horse you are riding on is dead the best course of action is to dismount'

2022-02-08 18:00

Philip ( buy what you understand)

My rationale comes from their business model. Hibiscus buys brownfield assets from shell and other customers who have gone through the majority of the extraction and sell it to hibiscus who believe that there is still more to dig and thus offer a bid for the assets. However being in the industry I think it is definitely more art than science on how much extraction can be done and selling at what price. Currently now at 90+ per barrel it would seem like a wonderful idea to buy, however if the oil price drops you will have the same case of sapura and armada which did speculative investments of the similar nature. Whether or not hibiscus paid a good price for the bid remains to be seen, however for the moment they seem to have struck black gold indeed.


Windy1974 Hi Philip. Well written as usual and it shows how much time you have spent on your investment.
However, please enlighten me how is Hibiscus speculative stock?

2022-02-08 19:10

Philip ( buy what you understand)

Yinson is definitely a bad investment. We should be looking at buying talamt and netx instead as they have huge assets! Those seem like a wonderful investment as calvintaneng is a top 30 shareholder in netx as I recall he claims.

What else do you know

02/2022 5:16 PM

calvintaneng Yinson Debt Bomb has ballooned to over Rm7 Billions (more than twice that of Serba)

2022-02-08 19:13


always enjoy your articles Philip! Good that you stand up to that clown who likes to spread negativity and hate

2022-02-08 19:19

Philip ( buy what you understand)

Very appreciated and thanks.

2022-02-09 06:20

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