• Stay BUY and MYR3.32 TP, 16% upside. We are neutral on the disposal of Yinson’s four OSV to Icon Offshore (ICON MK, NR) as it allows the group to streamline its businesses while retaining exposure in the OSV market as an associate. We continue to like the stock for potential new project wins as its new projects are reaching the tail-end conversion stage. We also see potential monetisation of its FPSO units as potential near-term catalyst for capital recycling.

• Disposing 4 OSVs to Icon. Yinson is disposing four OSV to ICON for a sale consideration of MYR160m which will be satisfied via the latter’s new share issuance of 181.8m at an issue price of MYR0.88/share (20% discount to its 5-day volume-weighted average price). The deal is expected to be completed by 4QFY24 (Jan). Following that, Yinson will be able to recognise a disposal gain of MYR40m and own a 16.2% stake in ICON to be recognised as an associate.

• Fair valuation. The deal seems fair given that it is at a slight premium to the valuation of independent valuers, MYR145.1-153.4m for the OSV business by the independent business valuer, FHMH Corporate Advisory (a member of Baker Tilly Group) and MYR153.7m for the four vessels by independent vessel valuer, M3 Marine Valuations. It allows Yinson to exit the OSV business and focus on existing FPSO, renewable energy or RE and Greentech businesses. The four vessels have an average age profile of 13 years and are currently on charter contracts of 1-3 years.

• We are neutral on the deal as it allows Yinson to streamline its businesses while retaining exposure in the OSV market as an associate. The domestic OSV market is still guided to be robust on the back of robust upstream activities and daily charter rates are at elevated levels due to vessel supply shortages and cabotage law effect. These four vessels contributed MYR20m to over 30m in FY23-24 and the earnings losses from the disposal could be partially offset by contribution from ICON as an associate. Note that we did not factor in the four OSVs into our SOP but the 16.2% stake in Icon would add MYR118m (c.1% of our SOP valuation) based on last traded price of MYR1.17. As such, we maintain our earnings estimates and SOP-based TP of MYR3.32 (including a 2% ESG premium based on ESG score of 3.1).

• Downside risks: Unable to win new jobs and contract terminations.

Source: RHB Research - 2 Sep 2024