Yinson on Maybank Research’s preferred oil and gas list


CIMB Equities Research has downgraded Yinson Holdings Bhd from Add to Hold after the share price rallied 23% over the past three months.

KUALA  LUMPUR: Maybank Investment Bank Research keeps Yinson as its preferred oil and gas (O&G) play due to its steady financials, lean/ focused management team with strong growth prospects and undemanding valuations. 

It  said on Wednesday its target price of RM4.45 is sum-of-parts based, which is 11% higher than the last traded price of RM4.

Maybank Research said developments on Yinson’s 3 floating production storage and offloading (FPSO) -- Lam Son, Four Rainbow & JAK -- are progressing well with minor hiccups. 

It said Yinson has finalised the settlement and amendment agreement with PTSC with regards to the termination notice for FPSO Lam Son. 

Yinson will receive a termination fee of US$213.6mil (RM871mil) by Jan 26. 

“However, we understand that the net compensation (less outstanding loan fees) is about US$31mil or RM128mil (based on its 49% stake). This is one-third below our initial estimate of US$47mil. 

“That said, the shortfall (i.e. 6 sen to net present value) should be covered by the finalisation of the new letter of award for FPSO Lam Son (currently on letter of intent), due anytime soon,” it said. 

Maybank Research said the FPSO has been on an immediate redeployment since July 1, 2017. 

It estimates the letter of award would add between four sen and 10 sen (on three year firm) and six sen to 13 sen (three year extension) respectively. It has excluded the earnings impact of the new LOA in its model for now. 

Yinson has acquired the remaining 49% of FPSO Four Rainbow from Four Vanguard Servicos E. Navegacao for US$9mil. 

“We see this as a strong sign of deploying this asset for JX Nippon O&G’s Layang project,” it said. 

It also pointed out that there is a one to three months delay to Yinson’s sale of the 26% stake of FPSO JAK to Sumitomo Corp, K-Line and Development Bank of Japan for US$117mil. 

“We now expect the deal to be concluded by 1QFY1/19. 

“Layang job aside, there are two to three firm tenders that Yinson is prospecting. Winning any of these could lead to further potential upside to earnings and net present value,” it said.

 

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