Reiterate BUY and MYR2.83 TP, 25% upside with c.1% FY23F (Jan). Upstream reported that Yinson has emerged as the frontrunner vying for Eni’s Agogo FPSO vessel contract. This is positive to Yinson, as it could lead to another project win by the end of this year. Our estimate conservatively suggests a MYR0.22 increase to our TP, if a deal is struck.
Frontrunner for Agogo project? Upstream reported that Yinson has emerged as the frontrunner for the EPCC contract that will deliver a FPSO vessel for Eni’s Agogo project, in offshore Angola. It was also reported that Yinson, together with Bumi Armada and Italy’s Saipem, were bidding for the project. In the same Upstream article, sources said that Eni will sign a letter of intent with Yinson imminently, with a commercial contract likely to be finalised later this year. The FPSO is designed to produce 120,000 bbl/day of oil and store about 1.6m bbl for the full-field development — Agogo’s second development phase. First oil from the new deep-water project is expected to flow in 2026. The article also highlighted that Cosco Shipping Heavy Industry and CIMC Raffles, which Yinson had worked with previously, are competing for the conversion work for the Agogo hull.
Lack of project details. If Yinson wins this project, it would be a positive for its growth prospects. We previously guided that the capex could be at least USD1bn. In terms of the charter period, it was reported by Upstream in May that the floater is required for a period of up to 20 years, despite not being able to confirm the charter period. Meanwhile, we would not be surprised if Yinson is expecting certain upfront payments from the client (ie to cover vessel costs) as part of the terms. If Yinson manages to seal the deal by the end of this year, a 36-month conversion period would be just in time to achieve first oil by 2026.
Keep BUY. Our SOP-derived TP stays at MYR2.83, with the incorporation of a 4% ESG premium to reflect its aggressive venture in renewable energy and green technology businesses. Note that we have yet to impute this project win into our TP. Based on our preliminary calculation, the project could be worth MYR0.22/share (8% of our TP), assuming a USD1bn capex, 15-year charter period, 10% project IRR, 7.5% WACC, 80% debt funding, and 100% equity stake. Every 1% increase in IRR would lift our TP by MYR0.06. The impact to the bottomline is estimated at MYR200m pa (24% of FY25F earnings). Downside risks: Further contract terminations and weaker-than-expected operating uptime for existing vessels.
