RHB Research retains Buy on Yinson, TP RM8.22


  • Analyst Reports
  • Thursday, 17 Oct 2019

On Wednesday, Yinson announced it was awarded two letters of intent by Petroleo Brasileiro (Petrobras) to provide a FPSO facility to the Marlim field located off the coast of Brazil, as well as the corresponding operations and maintenance (O&M) services.

KUALA LUMPUR: RHB Research is retaining its Buy call and target price of RM8.22 for Yinson Holdings Bhd after it secured contracts worth US$5.40bil or RM22.70bil in Brazil.

It said on Thursday it was positive on the FPSO Marlim 2 project win – marking its maiden venture into the Brazilian floating production storage and offloading (FPSO) market.

“Significant cost savings could be attained if Yinson is able to seal the Parque das Baleias project in Brazil, while the potential award of the Pecan project in Ghana by 4Q20 could serve as another near-term catalyst, ” it said.

On Wednesday, Yinson announced it was awarded two letters of intent by Petroleo Brasileiro (Petrobras) to provide a FPSO facility to the Marlim field located off the coast of Brazil, as well as the corresponding operations and maintenance (O&M) services.

The contracts, with a duration of 25 years, have an aggregate value of US$5.4bil.

Marlim 2 FPSO is expected to commence operations by 1Q23.

“We are positive on the contract win as it marks Yinson’s maiden venture into the Brazilian market. With this contract, its orderbook is doubled to US$10.3bil.

“The daily charter rate (DCR) of US$591,780 is 13% lower than the original bidding price, but 4% higher Modec’s pricing, as expected.

“At the analyst briefing, management guided that capex is US$1bil, and one of the very large crude carriers (VLCCs) purchased earlier will be sent to the yard for conversion.

“We also understand that Yinson has yet to finalise the equity stake but its partner, Sumitomo Corp (8053 JP, NR) is committed to participate with a minimum 20% stake.

“Management does not discount the possibility of monetising a higher stake subsequent to first oil, similar to its FPSO John Agyekum Kufuor, ” it said.

RHB Research said unlike its previous projects, FPSO Marlim 2 is likely to be recognised under finance lease accounting instead of operating lease accounting.

As such, Yinson is likely to recognise construction gain during the conversion period and front load its earnings upon the early stage of the charter period.

“It has yet to finalise the numbers pending discussion with auditors, but we estimate the project to deliver a construction gain of US$100mil during the conversion period, and first year net profit of US$65mil (c.70% of FY21F (Jan) earnings) in 2023, post first oil.

“Yinson is confident that the Pecan project in Ghana could be awarded in 4Q19, while the Limbayong project (partnering with MISC) in Malaysia has been delayed.

Yinson is the only bidder for the Parque das Baleias project in Brazil, and there is no sign of rebidding at this juncture.

“Yinson is targeting to seal the deal and kickstart the project early next year. Significant cost synergies could be realised if it can secure the project, ” it said.


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Yinson , Petrobras , FPSO

   

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