UOBKH Research believes the stronger and seamless collaboration between Yinson and Azule Energy will reopen the viability of the Block 31 project.
PETALING JAYA: The early delivery of floating production, storage and offloading (FPSO) vessel Agogo could provide a boost to Yinson Holdings Bhd
’s earnings and share price should production start four months ahead of schedule in the deep water field offshore Angola where it’s destined.
According to UOB Kay Hian Research (UOBKH Research), the vessel is sailing to the field operated by Azule Energy, and opens up the possibility of greater cooperation between the operator and Yinson in the future.
“FPSO Agogo may begin production from September 2025, which is nearly four months ahead of our current assumption of end-financial year 2026 (FY26) in our forecast,” the research house stated in a latest report on Yinson.
It added that in 2022, Yinson was appointed by Azule Energy (BP back then) to reserve an FPSO for the Palas, Astraea and Juno (PAJ) ultradeep water fields in Block 31, followed by subsea tenders issued in 2023.
Although nothing happened, UOBKH Research believes the stronger and seamless collaboration between Yinson and Azule Energy today will reopen the viability of the Block 31 project and explore opportunities that were not available back then.
The FPSO Agogo was awarded to Yinson in March 2023 at a contract value of US$5.7bil for 15 years of firm tenure.
Costing some US$1.5bil, the vessel is the world’s first with an offshore carbon capture and storage (CCS) system. UOBKH Research added that FPSO Agogo is capable of reducing carbon emissions by 27%.
That aside, it added that Yinson is planning to reveal “Enterprise Accounting” by its fourth quarter of FY25 (ending Jan 31) which the research house believes will help investors have a better understanding of metrics such as Yinson’s gearing and true net debt/earnings before interest, taxes, depreciation and amortisation (Ebitda) at Yinson.
This, in turn, could help with its valuation. A combination of high gearing and a flawed past earnings have led to Yinson’s depressed share price, it added.
UOBKH Research has maintained its “buy” call on the FPSO operator with a target price RM3.75 a share, valued at 13 times FY26 price earnings (PE) multiple or 10 times long-term PE once FPSO Agogo contributes to earnings fully by FY27.
“By then, Yinson Production’s Ebitda is estimated at US$0.9bil or three times the current base. We continue to favour Yinson for its execution and bold environmental, social and governance strategy, positioning it to be a winner in the energy transition.
“However, we acknowledge that the current price is discounted by transition costs and gearing levels,” the research house added. Shares of Yinson were last traded at RM2.29, giving the stock a market cap of RM7.05bil.
