CGS-CIMB Research says the preliminary FPSO Agogo contract was in line with its expectations that Yinson would win the deal from Eni Angola.
PETALING JAYA: Analysts are upbeat on Yinson Holdings Bhd
’s latest US$218mil (RM1.23bil) preliminary contract for the floating production, storage and offloading (FPSO) Agogo project in Angola.
This is regarded as an upfront payment for the group to kick-start its project there, according to RHB Research.
Yinson recently entered into an agreement for preliminary activities with Eni Angola, whereby both parties will take 60 days to formalise the long-term charter contract.
RHB Research, which is positive on the development, said Yinson management guided that the total capital expenditure (capex) could be slightly above US$1.5bil (RM6.6bil) while the total upfront payment by the client may amount to as much as one-third of the total project value.
On funding, the group noted there was no need for a rights issue – at least in 2023 – since management is exploring the capital recycling option to have new investors at the project level. Based on back-of-envelope calculation and assuming a capex of US$1.55bil (RM6.8bil), a 15- year charter period and a 10% project internal rate of return (IRR), RHB Research said: “The firm order could be worth US$4.7bil (RM20.6bil) with an implied daily charter rate of US$854,000 (RM3.74mil) per day.
“At 7.5% weighted average cost of capital and with a 100% equity stake, we value the project at 35 sen per share.”
The research house has raised Yinson’s target price (TP) to RM3.28 from RM2.91 previously, with the inclusion of the Agogo project into its valuation.
“We believe Yinson will seal the formal contract in two months, after which we will adjust the details accordingly. At a mere 10% IRR, our valuation is rather conservative, as every 1% increase in IRR would lift our TP by 13 sen,” it said. As Yinson is comfortable to own a project stake of about 70%, RHB Research said “We do not discount the possibility of new equity investors coming in at the project level going forward.”
Meanwhile, CGS-CIMB Research in its report said the preliminary FPSO Agogo contract was in line with its expectations that Yinson would win the deal from Eni Angola.
“We estimate that Agogo will be worth between 70 sen and RM1 per share to Yinson’s SOP value,” it added.
This is based on assumptions including project capex of US$1.3bil (RM20.6bil) with upfront supplier funding of US$500mil (RM2.2bil), 70% debt funding for the remaining capex, 30% minority stake to be held by a strategic partner, firm time charter period of 15 years plus five annual options, worth between US$6bil and US$7bil (RM26.3bil and RM30.7bil) for the entire 20 years and project delivery to Eni by late-2025.CGS-CIMB Research said, “We estimate that the Agogo project’s IRR will be between 23% and 28%, much higher than the 15%-16% for the Anna Nery and Maria Quiteria FPSO projects for Petrobras, due to the upfront capex funding from Eni Angola.”
It reiterated an “add” call on Yinson with a higher TP of RM3.55 from RM3.34 previously.
Potential re-rating catalysts include future FPSO contract wins and entry into new renewable energy projects.
