We maintain BUY on Yinson Holdings (Yinson) but with a
higher sum-of-parts based fair value of RM3.83/share (from an earlier
RM3.70/share), which implies an unchanged FY18 PE of 18x.
After adjusting for the group’s special dividend of 14.6 sen
which went ex on 24 October 2016, our higher SOP stems from the value accretion
arising from Yinson securing the revised tender for the Ca Rong Do FPSO
charter, for which the group has just announced the receipt of a letter of intent
from Repsol. While the announcement did not provide any details on the FPSO
charter, assuming a capex of US$600mil, project IRR of 11% and equity: debt
financing of 30:70, we estimate that a 49% equity stake in this charter will
translate to an NPV accretion of 28 sen or 8%. We also estimate that Yinson’s
earnings could be enhanced by RM33mil or 10% of FY19F. However, our FY17F-FY19F
earnings are unchanged as the FPSO conversion will likely be taken over 18
months, with first oil expected only in 2H2019.
Recall that Yinson and Bumi Armada were the only two bidders
for FPSO to Ca Rong Do Field Development located in Block 07/03 in the Eastern
Sea offshore Vietnam. Yinson will be converting the OSX-1 FPSO, for which it is
in the process of purchasing from financially distressed Brazil-based OSX. The
OSX-1 was demobilised last year from the Tubarao Azul field off Brazil, and is
able to produce 60,000 bpd with storage capacity for 950,000 barrels of oil.
Given Yinson’s locked-in earnings visibility with an order book of US$5.7bil
(RM25bil), which currently excludes the Ca Rong Do contract, the stock
currently trades at an attractive FY18F PE of 14x vs. over 20x for Dialog Group
and Petronas Gas.
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