RHB Research described the latest development as a funding leap for Yinson to embark on its future projects.
PETALING JAYA: Analysts are positive on Yinson Holdings Bhd
’s latest funding exercise, which allows the group to pursue new projects without further cash calls, while unlocking its value.
Yinson Production Offshore Holdings Ltd (YPOHL) has entered into a definitive agreement with a consortium of global investment firms, Abu Dhabi Investment Authority, British Columbia Investment Management Corp and RRJ Group to issue US$1bil in redeemable convertible preferred shares (RCPS).
There is an option to upsize by another US$500mil within 24 months and 10% warrants at a post-money valuation of US$3.7bil.
RHB Research in a report described the latest development as a funding leap for Yinson to embark on its future projects.
The US$1bil RCPS will be issued in four tranches, of which US$200mil of the proceeds will be utilised to further expand its renewable energy and green technology businesses, as well as to distribute to Yinson shareholders through share buy-backs and dividends.
The preferred dividend rate is 7.25% cash and 6.25% payment-in-kind or 12.95% in cash at the option of the Issuer.
The RCPS can be converted into new ordinary shares in YPOHL, a wholly owned subsidiary of Yinson in connection with an initial public offering within a targeted time frame of three-five years, and after an IPO, and redeemed while the warrants can be exercised into new YPOHL shares.
Post-conversion, Yinson is guided to own 71.9% of the enlarged company, said RHB Research, which kept a “buy” call on the stock with a new target price (TP) of RM3.69.
“Our current TP represents a 3% discount to its pre-money valuation and we see further upside once Yinson is able to win more projects going forward,” the research house added.
Similarly, CIMB Research in a note to clients said “We believe this capital injection will allow Yinson to strengthen its financial position without the need for a cash call, thanks to the structured equity exercise.”
This also enables Yinson to maintain its equity interest in YPOHL, with any dilution occurring gradually as the RCPS and warrants are converted into new shares.
“The US$1bil injection will significantly enhance the company’s balance sheet, improving liquidity and reducing its dependence on debt,” noted CIMB Research.
Post-funding, the brokerage firm said Yinson’s debt-to-equity ratio is set to improve to 0.7 times from 1.3 times, providing greater financial stability.
With the funds directed towards floating production storage and offloading (FPSO) project expansions, this move is perfectly timed, given the robust FPSO market outlook.
CIMB Research said Yinson is targeting one mid-sized FPSO project every 12 months, with projected capital expenditure of US$1bil to US$2bil, focusing on opportunities in the Africa and Asia regions.
The research house also sees this strategic funding as a strong signal of institutional confidence in Yinson’s capabilities, positioning the company for long-term growth through the expansion of its FPSO fleet, as it is supported by highly credible strategic investors.
CIMB Research has a “buy” call on Yinson with a TP of RM3.10 for now, pending completion of the RCPS and warrants issuance in the first quarter of 2025.
