Brazil rebid shakes Yinson, but it could emerge stronger


Following the announcement last week that the PDB charter is likely to open for new bids next month with the award likely by mid-2021, Yinson’s share price took a hit yesterday, closing 11.23% or 61 sen lower at RM4.82.

PETALING JAYA: The rebidding of the FPSO Parque das Baleias (PDB) charter in Brazil has thrown a spanner in the works for Yinson Holdings Bhd, which had expected to secure this tender, being the only remaining bidder.

Following the announcement last week that the PDB charter is likely to open for new bids next month with the award likely by mid-2021, Yinson’s share price took a hit yesterday, closing 11.23% or 61 sen lower at RM4.82.

The management of Yinson declined to comment on the matter.

While AmInvestment Bank and Maybank IB Research are negative on this development, both research houses felt that “not all is bad”, given Yinson’s robust pipeline of other fresh projects and decent chance in the rebid, due to completed works on the engineering design and costing process.

“As the very large crude carrier (VLCC) size of the FPSO is unchanged, Yinson does not expect substantive reductions to the estimated capex of US$1bil, which was already lowered in the earlier bid during direct negotiations with Petrobras over the past months.

Citing economic difficulties due to the Covid-19 pandemic and reduction in gas export curves involving the field, Petrobras cancelled the initial tender calling for the FPSO PDB and authorised the start of a new bidding process.Citing economic difficulties due to the Covid-19 pandemic and reduction in gas export curves involving the field, Petrobras cancelled the initial tender calling for the FPSO PDB and authorised the start of a new bidding process.

“The bidding cost of below US$10mil is likely to be capitalised for the new bidding process for PDB. Hence, the group is unlikely to incur any impairment provision from this development, ” said AmInvestment Bank.

Citing economic difficulties due to the Covid-19 pandemic and reduction in gas export curves involving the field, Petrobras cancelled the initial tender calling for the FPSO PDB and authorised the start of a new bidding process.

The commencement of the PDB charter is to be rescheduled by a year to the end of 2024.

Maybank IB Research viewed the rebid as a temporary setback, noting that without PDB, Yinson’s financials are healthier as the group has lower capital expenditure and does not require cash calls.

“We expect the participation (of the bid) among peers to be restricted, in view of the limited capacity available and tougher financing issues at hand to take on new jobs.

“The loss of this job will remove the need for a rights issue exercise, reduce execution risk, and reduce pressure on its balance sheet, intensify its energy transition plan and reward shareholders with a higher dividend per share payout, ” said Maybank IB Research.

Meanwhile, CGS-CIMB said Yinson’s current low share price provided investors the opportunity to increase their holdings in the group, as the management team would bounce back via new FPSO bids and renewable investments it is currently pursuing.

“We have followed Yinson long enough to know that management is able to reinvent itself (purchase of Fred Olsen and push into the FPSO business), pays attention to the maximisation of shareholder value (tough negotiations with banks to buy Ezion, strong push to bid for very profitable FPSO contracts in 2018 to 2019), looks forward to future developments (diversification into renewables), and is able to walk away from poor deals if conditions change (abandonment of Ezion deal), ” said CGS-CIMB.

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