ANALYSTS POSITIVE ON YINSON'S NEW GREEN INVESTMENT VENTURE

KUALA LUMPUR, Oct 7  -- Three research houses are positive on Yinson’s latest green investment -- the purchase of a stake in a Canada-based marine battery solutions company -- and have maintained a “buy” call on the energy infrastructure and technology company.

In a note today, AmBank Research said it is positive on the group’s purchase of a 20 per cent stake in Sterling PBES Energy Solutions Ltd (SPBES) and retained its “buy” call with unchanged forecasts and fair value of RM7.20 per share based on an environmental, social and governance (ESG)-adjusted sum-of-parts valuation.

“This reflects a premium of  three per cent for our ESG rating of four stars given that the group is the first oil and gas (O&G) service provider to proactively invest into renewable energy, and implies a financial year 2022 (FY22) forecast price-to-earnings ratio of 15 times, on par with the FTSE Bursa Malaysia KLCI currently,” it said.

Yesterday, Yinson announced that its wholly-owned Yinson Green Technologies Pte Ltd has invested an undisclosed amount for the stake in SPBES, a Vancouver-based energy storage company which offers marine and industrial solutions in 10 locations globally with installation partners in 26 countries.

In addition to the investment, Yinson and SPBES have also entered into a binding memorandum of understanding to form a joint venture to accelerate the large-scale rollout of SPBES’ solutions in selected countries in Southeast Asia and beyond.

“Assuming interest cost of  four per cent and 10-year depreciation cycles for capital expenditure of US$70 million (US$1=RM4.18), we estimate that the investment could increase Yinson’s earnings by two per cent for FY22 and more substantively by 10 per cent by FY23,” it said.

Meanwhile, RHB Research said it is long-term positive on the investments into SPBES, which are in line with Yinson’s net carbon zero ambitions – although near-term earnings contribution is expected to be minimal.

It said Yinson hosted a conference call yesterday to introduce its 20 per cent equity stake investment in SPBES, and total invested amount was guided at around US$22 million.

SPBES designs, builds, commissions, and services ESS-based solutions for marine vessels, with exclusive partners in North America, Europe, Middle East and North Africa, and the Far East.

RHB also agreed that Yinson has the highest ESG score within Malaysia O&G sector coverage, given its venture into renewable energy and green technologies.

Its downside risks include further contract terminations, and shorter-than-expected operating uptimes for existing vessels.

RHB has set a target price of RM7.40 for the Yinson, improved by 19.7 per cent.

Separately, UOBKayHian said Yinson’s continuous foray into green businesses is positive as it is more aggressive than its peers in non-O&G diversification and has a serious ESG commitment to achieve net zero carbon emission status.

“Nonetheless, we do not price this into our sum-of-the-parts (valuation) given its early stages of investment,” it said.

UOBKayHian noted that the investment amount, which was not revealed, is below Yinson’s threshold of US$20 million and comparable to the enterprise value/earnings before interest, taxes, depreciation and amortisation (EBITDA) peer valuations, based on SPBES’s FY23 EBITDA projection of US$70 million.

It has revised up its target price for Yinson to RM7.30 from RM5.88 previously after including a mega floating production storage and uploading contract win potential (after a 35 per cent discount) in its valuation.

At 11.20 am, shares of Yinson slipped 1.46 per cent to RM6.09 with 1.44 million shares transacted.

-- BERNAMA