• Keep BUY, with new MYR3.69 TP from MYR3.31, 37% upside and 2% FY26F (Jan) yield. We are overall positive on Yinson's latest funding exercise as it allows the group to pursue new projects without immediate dilution while unlocking its value. Our current TP represents a 3% discount to its pre-money valuation and we see further upside once Yinson is able to win more projects going forward.
• Secured USD1bn investment via RCPS issuance. Yinson's offshore production business, Yinson Production, has entered into a definitive agreement with a consortium of global investment firms (Abu Dhabi Investment Authority (ADIA), British Columbia Investment Management Corporation (BCI) and RRJ Group) to issue USD1bn in redeemable convertible preferred shares (RCPS) with an option upsize by another USD500m within 24 months and 10% warrants at a post-money valuation of USD 3.7bn. This is priced at 7.1x 12M trailing EV/ EBITDA vs peer average of 6.5x. The transaction is expected to be completed by 1QCY25 subject to shareholder approval.
• For future projects. The USD1bn RCPS will be issued in four tranches, of which USD200m of the proceeds will be utilised to further expand its renewable energy (RE) and green technology businesses, as well as to distribute to Yinson shareholders through share buy-backs and/or dividends. The preferred dividend rate is 7.25% cash and 6.25% payment-in-kind or 12.95% in cash (at the option of the Issuer). The RCPS can be converted into new ordinary shares in YPOHL, a wholly owned subsidiary of Yinson in connection with an IPO within a targeted time frame of 3-5 years, and after an IPO, and redeemed whilst the warrants can be exercised into new YPOHL shares. Post conversion, Yinson is guided to own 71.9% of the enlarged company. On the flipside, the RCPS can be redeemed at any time by the issuer subject to 15.75% internal rate of return (IRR) and 3-year make whole period.
• Keep BUY. We are overall positive on the funding exercise as it allows Yinson to pursue new projects without further cash calls while unlocking its value. Post exercise, the net gearing is expected to reduce significantly from 1.3x to 0.7x. Note that the implied pre-money of USD2.7bn valuation is 15% higher than our current valuation. As such, we lift our SOP-based TP to MYR3.69 (which includes a 2% ESG premium) after assuming a lower equity risk premium in arriving our DCF valuation. We see further upside potential as Yinson is still targeting to win at least one FPSO project pa.

Source: RHB Research - 15 Jan 2025