The strategic nature of this funding is expected to reduce Yinson’s net gearing ratio
RHB Investment Bank Bhd (RHB Research) has reaffirmed its positive outlook on Yinson Holdings Bhd, upgrading its target price (TP) to RM3.69 from RM3.31.
This suggests a potential upside of 37% and an estimated yield of about 2% for the financial year ending January 2026.
The research firm expressed confidence in Yinson’s recent financing arrangement, noting its potential to fund new projects without diluting equity, while also delivering value to shareholders.
Yinson Production, the offshore division of Yinson, has partnered with a consortium of global investors, including Abu Dhabi Investment Authority, British Columbia Investment Management Corp and RRJ Group.
The agreement involves issuing US$1 billion (RM4.5 billion) in redeemable convertible preference shares (RCPS), with an option to increase by another US$500 million within two years.
The transaction, valued at 7.1 times trailing 12-month enterprise value-to-EBITDA, is expected to close by the first quarter of 2025, subject to shareholder approval.
Proceeds from the RCPS issuance will be released in four stages, with US$200 million dedicated to expanding Yinson’s renewable energy (RE) and green technology operations.
Other funds will be used to enhance shareholder returns through dividends or share buybacks.
The RCPS offers a preferred dividend rate of 7.25% in cash or 6.25% in kind, with a cash option capped at 12.95%.
Investors can convert these shares into ordinary shares of Yinson Production Offshore Holdings Ltd (YPOHL), Yinson’s wholly owned subsidiary, which may be listed in the next three to five years. Alternatively, the shares
can be redeemed with a 15.75% internal rate of return and a three-year make-whole provision.
RHB Research highlighted the strategic nature of this funding, which is expected to reduce Yinson’s net gearing ratio from 1.3 times to 0.7 times, strengthening its financial position.
The implied pre-money valuation of US$2.7 billion is 15% above prior estimates by the research house. The updated target price also includes a 2% ESG premium, reflecting Yinson’s sustainability commitments.
Moreover, Yinson’s plan to retain a 71.9% stake in YPOHL after conversion underscores its long-term growth potential.
This funding initiative is expected to position Yinson to capitalise on future opportunities, particularly in acquiring more floating production, storage and offloading (FPSO) contracts.
The move aligns with the company’s focus on bolstering its offshore energy production capabilities while diversifying into RE sectors.
Analysts believe these measures will drive Yinson’s growth and value creation.
News of the US$1 billion investment from the Abu Dhabi-led consortium boosted market sentiment, with Yinson shares hitting a one-month high upon resumption of trading on Jan 15.
CIMB Securities Sdn Bhd noted that the deal enhances Yinson’s financial stability, reducing its debt-to-equity ratio from 1.3 times to 0.7 times.
The allocation of proceeds to the FPSO division is seen as timely, given the sector’s strong growth prospects.
Following the announcement, shares of Yinson rose by 11 sen, or 4%, to RM2.81, marking their highest level since December 2024. — TMR
- This article first appeared in The Malaysian Reserve weekly print edition