Kenanga Research raised Yinson Holdings Bhd’s target price (TP) marginally by 1% to RM3.47 and maintained its OUTPERFORM call after it has acquired the 97MW Matarani Solar project in Peru, with a 15-year Power Purchase Agreement (PPA).
“The group anticipated annual contribution is around RM16 million, with an expected an internal rate of return (IRR) of 8% (from this).
“Following the inclusion of the Matarani Solar project, the group increases its sum of parts (SoP)-TP by 1% (RM0.07 per share) from RM3.39, assuming 10% weighted average cost of capital (WACC) and 80% earnings before interest, taxes, depreciation and amortization (EBITDA) margin.
“Our TP reflects a 5% premium accorded by a 4-star ESG rating as appraised by us,” it said in its Company Update today (Jan 31).
Yinson has successfully concluded the acquisition of the Peru project, with a capacity of 97MW, from Grenergy Renewables (Grenergy) for a consideration of USD90 million (including acquisition of stake and further earnouts payable to Grenergy).
The majority of the project’s energy is under a 15-year PPA with an undisclosed off-taker, set to commence in 3QCY24.
This is a positive announcement as the project is expected to contribute approximately RM16 million annually at full operational capacity,
with an estimated tariff of USD0.03/kWh, yielding an 8% (IRR).
Grenergy will handle the engineering, procurement, construction, and commissioning (EPCC) and provide operation and maintenance
services for the initial two years upon full commencement, ensuring a smooth and timely project completion.
Kenanga said it maintained its forecasts for the group despite the commencement of Matarani Solar project in 3QFY25, it expect contributions from the project to be largely offset by startup costs.
“We continue to favour Yinson due to a strong floating production storage and offloading (FPSO) order book pipeline, its strong project execution track record and it being one of the first local oil & gas company invest in green technology companies,” it said.
The risks to Kenanga’s call include crude oil prices falling below USD70 per barrel raising required IRR for new floating production projects, regulatory risks and uncertain returns for renewable energy (RE) investments and project execution risks.
