Yinson Holdings Ga-Ga Over Agogo

Yinson recently announced the securing of a new project to its portfolio which is well received by the market research community. With this preliminary announcement, it appears that Yinson will soon add the Agogo FPSO project to its portfolio, which offers accretive values (+MYR2b-2.5b in NPV)/ order backlog (+USD5b-6b), with bankable long-term charters of 20 years, operational benefits (low lifting costs, big reserves, decent upfront payment) and low counter-party risk.

Maybank IB is maintaining the target price for now with an upside bias once the LOA is finalised by Feb 2023. The Agogo project offers upfront payment, 60 days to LOA Yinson has entered into an Agreement for Preliminary Activities (APA,
akin to a LOI) with Eni Angola S.p.A first, a precursor to the finalisation of a contract by Feb 2023. This APA secures Yinson USD218m (MYR956m) in partial upfront payment for this job and allows it to kick-start preliminary works on this project (i.e. procuring a VLCC – Front Eminence for conversion works), to meet the project schedule (1st oil: end 2025).

The research house based on its preliminary assessment says the counters look good, while several salient details, such as contract values and capex are not disclosed in this announcement, understandably the Agogo contract will be the biggest (value-wise) and most lucrative (in returns) within its FPSO portfolio (>USD5b, surpassing its Brazilian Marlim 2/ PDB, albeit with a lower tenure: 15+5 years vs. 25 years/ 22.5 years).

Maybank IB feels the project is bankable, with strong counterparties. The upfront payment is expected to be larger than USD218m, accounting for 30% of the capex (e.USD1.8b). That, coupled with its intention to bring in strategic partners (20%-30% equity) into this job, would ease its financing risk. There will be no cash call for this job. This field has a low lifting cost of e.USD6-8/bbl and sizeable reserves (1b bbls; to support up to 20 years of production @ 150k bpd).

Agogo is worth about MYR2b-2.5b in NPV. Based on our preliminary back-of-envelope assessment, the Agogo job would add about MYR0.70-0.80/shr to our TP/ NPV, based on: (i) a 100% stake, (ii) 11% WACC, (iii) USD1.8b capex, (iv) 12-year financing, 8% interest rate. Our TP has yet to impute this positive impact.

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