Analysts positive on Yinson’s contract win in Vietnam
KUCHING: Analysts at the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) are positive on Yinson Holdings Bhd’s ( Yinson) latest venture in Vietnam.
They believed the company’s new contract award would enable the group to improve its earnings outlook, in which the contract secured has a long term tenure.
The analysts also believed the counterparty risk for Yinson was low as one of the owners of the oil field is a state- owned oil corporation of Vietnam.
Yinson told Bursa on Monday that the group’s indirect wholly owned subsidiary, Yinson Production Pte Ltd has received a letter of intent from Talisman Vietnam 07/03 B.V. (TLV), a whollyowned subsidiary of Respol, for the supply of a floating, production, storage and offloading ( FPSO) facility for the Ca Rong Do (CRD) field development located in Block 07/03 offshore Vietnam.
TLV is a whol ly- owned subsidiary of Repsol, a global integrated oil company listed on the Madrid Stock Exchange and is the operator of the CRD field.
Other owners in the CRD Field are PetroVietnam, PetroVietnam Ex plor at ion Produc t ion Corporation ( PVEP), Mubadala Petroleum and Pan Pacif ic Petroleum.
Kenanga Research opined that the new contract award was not a surprise for them as Yinson was one of the finalists for the project.
It gathered that the finalisation of the terms and conditions of the contract, commercial arrangement and approvals of the relevant authorities is expected to be completed by April 2017.
“As for financing for the contract, Yinson is likely to maintain the company’s existing joint-venture business model with PetroVietnam in Vietnam at 20-30 per cent or 70- 80 per cent equitydebt financing,” it said in a note yesterday.
It estimated the new FPSO maiden earnings to contribute approximately RM32 million per annum to Yinson’s bottom line in the future.
In the meantime, Kenanga Research made no changes to Yinson’s financial year 2017 (FY17) ending January 2017 and FY18 earnings estimates as the CRD FPSO earnings will only be recognised into the company’s accounts by the third quarter of 2019 (3Q19).
“Pending more details of the contracts, the value of the contract ranges from US$ 800- US$ 900 million assuming a 10-year period with an option for an extension for another five years.”
On another note, Kenanga Research gathered that the O&G company intends to buy a vessel, OSX-1 vessel.
The vessel is designed with production capacity up to 60,000 barrels of oil per day ( bbl/day) with storage capacity up to 900,000 bbl/day.
Upon conversion of the vessel which could take 24 months, it forecasts that the first oil production is expected to be in 3Q19.
With a long term contract in hand and potential earnings improvement, Kenanga Research has maintained its ‘outperform’ rating on Yinson.
The research firm continued to favour Yinson given the company’s long-term FPSO contracts, which provides recurring cash flow and ability to secure contracts with oil majors amid competitive global FPSO market.
Based on the research firm’s estimates, it projected the Vietnam’s CRD project could be add an additional 29 sen per share to its earnings per share valuation for Yinson.