Yinson to undertake rights issue if it wins new FPSO jobs


YINSON Holdings Bhd will need to undertake a rights issue up to RM2.3 billion if it secures the floating, production, storage and offloading (FPSO) projects in Brazil, Suriname and Angola.

The cash requirement assumes Yinson will require capital expenditure of US$800 million (RM3.29 billion) to secure the Parque das Baleias from Petrobras of Brazil and US$1 billion each for the Suriname and Angola projects.

AmInvestment Bank Bhd analyst Alex Goh noted that Yinson is planning for a rights issue with its US$1 billion Anna Nery project for Petrobras and potentially fresh renewable energy (RE) projects.

“Assuming a conservative project internal rate of return of 12% and 20 to 80 equity-to-debt financing ratio, together with the dilution from issuance of rights shares at a 30% discount to its current market price, we estimate these three massive projects will slightly raise Yinson’s current sum-of-parts (SOP) valuation by 10% to RM7.95 per share,” he stated in a release yesterday.

Yinson was reported to have been selected by Total SA to perform preliminary front-end engineering design or pre-FEED for two FPSO projects to be installed in Block 20/21 in Angola and Block 58 in Suriname.

There are two to three other contractors shortlisted for the job, allowing Total to choose the best engineering design which could lead the winner securing the FPSO charters involving substantive vessel capital expenditure of US$1 billion to US$1.5 billion each.

Goh added that given the energy transition’s impact on oil and gas (O&G) project financing, Yinson’s SOP valuation could decline by 7% if the equity-to-debt financing ratio is required to be higher at 30 to 70 for all three projects.

“We expect the group to mitigate any potential value dilution by disposing of part of its equity stakes in the projects to other strategic shareholders, such as Sumitomo Corp and Kawasaki Kisen Kaisha Ltd, which currently have equity stakes of 25% and 10% respectively in Yinson’s Anna Nery FPSO,” he added.

Besides O&G projects, Yinson remains on the prowl for additional RE projects in India.

Yinson could opt to recycle its RE capital later at lower interest costs post-development, the investment bank stated, but it remains sanguine on Yinson’s energy transition strategy that is well ahead of its peers and should garner environmental, social and corporate governance (ESG) supported premium valuations over the longer term.

Goh maintains its ‘Buy’ rating on Yinson as the stock currently trades at a bargain financial year 2022 forecast (FY22F) price-earnings of only 10 times for a globally recognised FPSO player, with a healthy balance sheet and a formidable outstanding orderbook of RM41 billion, translating to a robust 13 times FY22F revenue.

He now has an unchanged fair value of RM7.20 per share for Yinson based on an ESG adjusted SOP valuation.

The company’s share price closed at RM5.05 yesterday, giving it a market cap of RM5.3 billion.