Quick take:Yinson gains 4% on news of RM2.36bil JX Nippon contract


  • Stock on the Move
  • Friday, 15 Feb 2019

KUALA LUMPUR: Shares in Yinson Holdings Bhd were boosted in early trade Friday after announcing a RM2.36bil contract from JX Nippon Oil & Gas Exploration (Malaysia) Ltd.


Yinson is currently the third top gainer, rising 18 sen, or 4.41% to RM4.26 with 101,900 shares traded. It is trading at a P/E ratio of 18.91 times.


Yinson said its wholly-owned subsidiary has been awarded a contract worth US$578mil (RM2.357bil) from JX Nippon.


The contract, awarded to Yinson Energy Sdn Bhd on Feb 12, is for the provision of operations and maintenance (O&M) services for JX Nippon’s floating production storage and offloading (FPSO) facilities.


"The tenure of the O&M Contract is effective from Feb 12 and shall remain in full force until termination of the contract for the provision of EPCIC (engineering, procurement, construction, installation & commissioning) and leasing for the Layang FPSO facilities.


“The charter contract is for a firm period of eight years and comes with options for 10 extension periods of one year each," Yinson said.


AmInvestment Bank Research has maintained its “buy” call on Yinson with a higher sum-of-parts-based (SOP) fair value of RM5.90 per share (from an earlier RM5.53 per share), implying an FY21F PE of 15x.


“Our revised SOP reflects the higher-than-expected operation and maintenance (O&M) contract value for the Layang floating production, storage and offloading (FPSO) vessel, which could be commencing earlier in October this year as compared with the schedule by the end of this year,” it said.


The research house noted that Yinson was currently bidding for Petrobras’ Marlim I and Marlim II FPSOs, in which Modec appears to be the leading contender.


However, Yinson is also expected to bid on March 1 this year for the FPSO for the integrated development of the Parque das Baleias (Parque), which has negligible local content requirement.


“Assuming a capex of US$1.5bil similar to Bumi Armada’s Olombendo FPSO, project IRR of 11%, WACC of 7.7% and debt-to-equity financing ratio of 80:20%, we estimate that a single win for any one of the Marlim 1, Marlim II or Parque FPSOs could enhance Yinson’s SOP by RM1.81 per share and contribute earnings of RM200mil – 59% of FY21F EPS,” it said.


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