KUALA LUMPUR : Analysts raised their target prices (TPs) for Yinson Holdings Bhd, as they view favourably the floating, production, storage and offloading (FPSO) project worth US$218 million (RM956 million) won by the oil and gas company in Angola.

Oil major Eni Angola awarded the contract to Yinson on Dec 2 for Yinson to begin preliminary work on the FPSO Agogo project.

RHB Research raised its TP for Yinson to RM3.28 (from RM2.91 previously), with its “buy” call maintained.

“Overall, we are positive on this development, as it is regarded as an upfront payment for Yinson to kick-start the Agogo project. Management guided that total capital expenditure (capex) for this could be slightly above US$1.5 billion, while total upfront payment by the client may amount to as much as one-third of total project value.

“On funding, Yinson guided that there is no need for a rights issue — at least in 2023 — since management is exploring the capital recycling option to have new investors at the project level. The recent retracement in raw material prices should also provide a breather for overall project cost,” said RHB in a note.

Based on the research house’s back-of-envelope calculation and assuming a capex of US$1.5 billion, a 15-year charter period and a 10% project internal rate of return (IRR), the firm order could be worth US$4.7 billion, with an implied daily charter rate of US$854,000 per day.

“At a 7.50% WACC (weighted average cost of capital) and 100% equity stake, we value the project at 35 sen a share,” it said.

CGS-CIMB Research, on the other hand, estimated that Agogo will be worth 70 sen and RM1 per share to Yinson’s sum-of-parts value, based on the assumption that the project’s capex will be US$1.3 billion.

The research house, which kept its “add” call for the stock, raised its TP from RM3.34 to RM3.55.

“We estimate that the Agogo project’s IRR will be between 23% and 28%, much higher than the 15-16% for the Anna Nery and Maria Quiteria FPSO projects for Petrobras, due to the upfront capex funding from Eni,” it explained.

CGS-CIMB said the contract is intended to “safeguard the project schedule” while waiting for the final contract to be signed.

“We expect more upfront funding from Eni to be secured later. The terms of any upcoming final contract have not been disclosed, but could be awarded in the next two months,” CGS-CIMB added.

Shares in Yinson were trading up three sen or 1.26% at RM2.42 each at the time of writing on Tuesday, valuing the group at RM7.39 billion.

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Yinson inks RM956m FPSO deal in Angola