Yinson remains attractive despite price crash

The price crash of Yinson Holdings Bhd should be perceived as a buying opportunity for the floating, production, storage and offloading (FPSO) service provider, according to CGS-CIMB Research.

Yinson dipped as much as 13% today following news that Petrobras would not award the FPSO Parque das Baleias (PDB) contract to Yinson which is the only qualified bidder, but rather proceed with a rebidding exercise.

This means the initial target of commissioning the FPSO in 2023 is now deferred by a year to 2024.

“Investors had clearly held on to the hope of Yinson securing the contract which explains why the share price fell 13% this morning to RM4.75 at 12.30pm,” observed analyst Raymond Yap.

This is the second major disappointment to Yinson since the oil price crash in March. The first was Aker Energy’s decision to cancel its Ghana project which was awarded to Yinson in February as a letter of intent (LOI) for the charter of the FPSO Pecan but was not yet formally awarded to Yinson as a firm contract.

“The low share price gives investors the opportunity to increase their holdings of Yinson because its management team will bounce back via new FPSO bids and the renewables investments it is currently pursuing,” Yap further noted.

In terms of the existing projects on hand, the FPSO Abigail-Joseph (AJ) has been hooked up, with first oil to be achieved very soon while the risk of termination is very low due to the circa US$20/bbl oil price for the project to breakeven on both capex and opex.

Additionally, the FPSO Marlim-2 project execution is continuing with the LOI awarded by Petrobras in October 2019 and the firm contract signed in March.

“The key risk we can think of is the FPSO Lam Son contract with PetroVietnam which ends on June 30 next year may not be renewed beyond that,” projected Yap. “But non-renewal only removes 33 sen/share from our SOP (sum-of-parts value) at the most.”

All-in, CGS-CIMB maintained its “add” call on Yinson with an unchanged target price of RM6.56.

At market close today, Yinson retreated 61 sen or 11.23% to RM4.82 with 11.84 million shares traded, thus giving the company a market capitalisation of RM5.29 bil.

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