Job termination sends Yinson shares lower

  • Energy
  • Thursday, 02 Apr 2020

Yinson counter shed 8 sen or 1.68% yesterday to RM4.69, with 2.54 million shares traded, its lowest since May 21 last year.

PETALING JAYA: Yinson Holdings Bhd has started to see selling pressure following the termination of its proposed contract to operate a vessel for Aker Energy Ghana Ltd’s Pecan project in Ghana.

The counter shed 8 sen or 1.68% yesterday to RM4.69, with 2.54 million shares traded, its lowest since May 21 last year.

The group said in a filing on Bursa Malaysia yesterday that it received a notice from Aker Energy Ghana Ltd of its decision to terminate the letter of intent for the proposed award of contracts to operate a floating production, storage and offloading (FPSO) at the Deepwater Tano Cape Three Points contract area, in the offshore of Ghana.

It added that the termination was due to the decision made by Aker Energy to postpone activities under the DWT/CTP Petroleum Agreement and the development of the project until further notice amidst the coronavirus disease (Covid-19) pandemic.

The group added that the termination will have no material effect on its earnings and net asset per share for the financial year ending Jan 31,2021.

It also noted that it preserved the right under the letter of intent for compensation due arising from the termination.

Maybank Investment Bank Research said the suspension of the project was only a minor setback but not unexpected.

The research house had already expected a knee jerk reaction due to the termination but it said that Yinson remained its oil and gas (O&G) sector pick as it was a safety bet for its strong earnings visibility.

Yinson is the sixth largest independent floating production storage and offloading (FPSO) leasing entity worldwide in terms of fleet size.

Maybank IB maintained its “buy” call on Yinson with an unchanged target price of RM7.20, which excluded the Pecan project, the proposed acquisition of Ezion Holdings Ltd and rights issue.

“Yinson needs to decide on what to do with the very large crude carriers (VLCC), which has been committed for this project.

“It can either allow the vessel to continue to trade as a tanker or monetise the asset, which carries a value of US$30mil to US$33mil, ” it said.

On whether the job could still go ahead, the research house is of the opinion that there were two plausible scenarios, one is if the project is subsidised by both Ghana and Norway (Aker Energy is headquartered in Norway) to make it viable and if the oil price recovers to more than US$50 per barrel.

Maybank IB also said that a rebound in oil price will be the most near-term share price driver. Brent crude oil was in the range of US$25 as at press time.

Meanwhile, Kenanga Research said in its technical watch report that Yinson has broken below the “flag” continuation pattern and had higher-than-average trading volume.

Coupled with the bearish signal from the moving average convergence/divergence (MACD) indicator, it believed that the stock could move lower.

“Should selling momentum persist, support levels are at RM4.50 and RM4, ” it said.

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