Rerating catalyst likely for Yinson

PETALING JAYA: Private equity firm RRJ Capital investment in one of Yinson Holdings Bhd’s floating production, storage and offloading (FPSO) projects may be in the form of a loan to help the latter fund its portion of the Agogo vessel project, says CGS-CIMB Research.

A recent Bloomberg report stated that RRJ Capital is close to signing an agreement to become an investor in one of Yinson Holdings’ FPSO units, before the end of the month.

However, the news agency said deliberations were ongoing and there was no certainty that the US$300mil (RM1.38bil) deal would proceed.

“In our analysis, we believe that this US$300mil is not an equity investment per se, but rather a term loan to help Yinson fund its equity portion of the Agogo capital expenditure (capex),” CGS-CIMB Research said.

“Of the total Agogo capex of US$1.8bil, Yinson previously disclosed to investors that US$500mil will be funded by the charterer Eni itself via upfront payments, project financing bank debt is currently being arranged for US$1bil, and the remaining US$300mil will be Yinson’s equity portion,” the research house said.

But given Yinson’s tight cash balances, the it added that the group probably intends to tap on a term loan from private equity firms instead of drawing on its own cash.

In a similar vein, CGS-CIMB noted that last week Yinson had announced that it would take a six-year US$230mil term loan from a consortium of lenders led by Global Infrastructure Partners.

This loan will be used to fund Yinson’s equity portion of the FPSO Maria Quiteria capex of US$950mil, for which it had already secured a six-year US$720mil syndicated loan facility in 2022.

“If the Bloomberg article is accurate, this means that Yinson is close to pulling off two very successful rounds of fundraising for the equity portion of its two major FPSO projects, the MQ and Agogo, which is testament to these non-bank lenders’ confidence in Yinson because these term loans are unsecured,” CGS-CIMB Research said.

The research house pointed out that it expects fixed interest rates on both the equity loans.

The research firm reiterated its “add” call with a RM3.57 target price for the stock in its report.

It expects Yinson’s second quarter financial year 2024 (2Q24) profit after tax and minority interests to exceed 1Q24’s RM208mil as the group will book in the full bareboat charter rate from the FPSO Anna Nery, which achieved first oil on May 7, 2023.

This is a key rerating catalyst, according to CGS-CIMB Research.

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