AmInvestment prefers companies with stable and recurring earnings such as Dialog Group and Yinson
KUALA LUMPUR: AmInvestment Research is maintaining its buy call on Yinson Holdings
with unchanged forecasts and sum-of-parts (SOP) fair value of RM4.50 a share, which implies an FY19F price-to-earnings (PE) of 15 times.
It said on Thursday Yinson’s 49%-owned floating production storage and offloading vessel (FPSO) PTSC Lam Son has received a fee of US$209mil (RM840mil) for the termination of the bareboat charter effective on June 30, 2017 following the liquidation of Lam Son Joint Operating Company (LSJV).
The cash settlement was used to fully settle the outstanding loan on the FPSO, with a net cash balance of US$22mil.
Recall that this charter, signed on Dec 28, 2012, services the Thang Long–Dong Do field for Blocks 01/97 & 02/97, off Vietnam.
Operating in Lam Son Field since June 2014 on a fixed primary term of seven years, there is only four remaining years for the charter.
“This FPSO, which costs US$400mil, contributes an estimated net profit of RM40mil or 18% to Yinson’s earlier FY18F earnings.
“However, as mentioned in our update, Yinson was entitled to the discounted cash flows of the remaining time charter, which we still estimate at RM460mil in our sum-of-parts (SOP) – 11% of our SOP and close to our valuation for the termination fee,” it said.
AmInvestment Research pointed out PetroVietnam continues operating the Lam Son field and is still utilising the current FPSO.
“Hence, we are mildly positive on this development as the termination itself will be NPV neutral for Yinson while the high likelihood for a new charter with PetroVietnam, albeit at a lower rate, will provide further DCF and earnings accretion,” it said.
However, the research house said there are still further prospective value enhancements to the group as its now wholly-owned FPSO Four Rainbow, currently idle, could be redeployed in the Southeast Asian region.
Yinson recently acquired the remaining 49% stake from Four Vanguard Service E Navegacao for US$9mil, which means that the current vessel costs only US$44mil (including the exercise of US$11mil option shares).
Recall that Yinson is in discussions with JX Nippon Oil & Gas Exploration (M) Limited and TH Heavy Engineering to take over the charter for the FPSO, expected to cost less than US$400mil and to be deployed in the Layang field in Block SK10 off Sarawak.
“The group may also be eyeing a Hess-related FPSO project in Ghana, which could cost over US$1bil, similar to the group’s earlier vessel for Eni. Hess’ Tano-Cape Three Points off Ghana recently won a territorial dispute with the Ivory Coast, as mediated by the International Tribunal of the Law of the Sea.
“Underpinned with locked-in earnings visibility from an order book of US$4.2bil (25 times FY18F revenue), the stock currently trades at a bargain CY18F PE of 13 times vs. over 20 times for Dialog Group and Sapura Energy,” it said.
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