Yinson-Sumitomo JV a good contender for future projects

KUALA LUMPUR: Yinson Holdings Bhd (Yinson) and Sumitomo Corp’s (Sumitomo) joint venture (JV) will be a good contendor for future project bids as the collaboration will enhance its competitive edge in the floating production storage and offloading (FPSO) field, says AmInvestment Bank Bhd (AmInvestment Bank).

The two entities entered into a memorandum of understanding back in April 2018 and Yinson has recently signed a letter of agreement for Sumitomo to participate in at least 20 per cent effective interest in a FPSO vessel.

“If the JV sucessfully secures the tender, the FPSO vessel will to be deployed in the Marlim oil field in Brazil. “However, we understand from the analyst briefing last week that Sumitomo may be taking up to 30 per cent equity interest in this venture,” reported the bank.

Under the JV, Yinson will be managing the project implementation side of things while Sumitomo will be handling the logistics and financing arrangements.

“(This arrangement) could enable the JV partners to enhance competitive bid saga isnt rival Mo dec - another Japan-based engineering, procurement, construction and installation (EPCI) provider that also charters FPSOs,” said the research arm.

Currently, Yinson and Modec are both bidding for Petrobras’ Marlim I and Marlim II FPSOs with Modec appearing to be the leading contender in the bid.

“Yinson is also expected to bid on 1 March this year for an FPSO for the integrated development of Brazil’s Parque das Baleias (Parque) project,” the reported added.

And besides Brazil, Yinson is also tendering agaisnt Modec, SBM offshore and Bumi Armada to supply an FPSO potentially costing over US$1.1 billion for Aker Energy’s Pecan field int he deepwater tano cape three point block off Ghana’s coast.

“Assuming a capex of US$1.5 billion, similar to Bumi Armada’s Olombendo FPSO, project IRR of 11 per cent, WACC of 7.7 per cent, equity stake of 70 per cent and debtto-equity financing ratio of 80:20, we estimate that a single win for any one of these four FPSOs could enhance Yinson’s SOP by RM1.27 per share and contribute earnings of RM140 million – 36 per cent of FY21F earnigns per share (EPS),” stated the bank.

And with the compeltion of Yinson’s FPSO Helang by the end of 2019, the bank reports that its projct management team is comfortable securing two large projects this year.

All things considered, AmInvestment Bank is maintaining their ‘Buy’ call on Yinson with an unchnaged SOP fair value of RM6.10 per share – implying a FY21 price earnigns ratio of 17-fold.