Is Yinson's valuation justified?
A recent Bloomberg report claiming that US-based infrastructure investment giant Stonepeak Partners was in exclusive talks to acquire the Malaysian energy infrastructure player sent its shares surging by nearly 14%.
Though Yinson has denied any direct involvement in buyout talks, it did admit that major shareholders – including the Lim family, who hold a 26.6% stake – are exploring options with 'various parties'.
But as the dust settles, a deeper question emerges: is Yinson truly worth the RM9bil valuation implied in the reported talks?
At the time of the report, Yinson was trading at RM2.33 per share, giving it a market capitalisation of about RM7.17bil.
The implied RM9bil buyout price suggests potentially up to a 32% upside.
Such premiums aren't unusual in strategic merger and acquisition deals, but do the fundamentals justify this leap?
The purported talks have brought to light the supposedly low valuations of the company.
Yinson's price-earnings ratio (PER) of 6.5 times trails peers Bumi Armada Bhd 's five times and MISC Bhd 's 30 times.
But looking at its forward price-earning of about 15 times, this is higher than that of MISC Bhd of 14.3 times forward PER and Bumi Armada Bhd's five times.
According to analysts, while Yinson's price-earnings is among the lowest in the sector, this often reflects perceived risks.
'Its high leverage and ongoing capital expenditures for its floating, production, storage and offloading (FPSO) builds are the main culprits,' an analyst tells StarBiz.
The company has a total borrowing of RM16.32bil or net gearing (including perpetual securities of RM1.94bil) of 1.8 times in the financial year ended Jan 31, 2025.
'Yet, return metrics like return on equity and net margins remain strong, hinting at robust underlying performance,' he adds.
Yinson has positioned itself as more than just an oil and gas contractor. It boasts long-term FPSO contracts, offering stable cash flows.
With over US$20bil in contract backlog, the company has visibility well into the next decade.
Meanwhile, CGS International Research is not surprised by the news of a potential privatisation as this would mean the shareholders of Yinson should reap significant gains from the potential listing of its subsidiary Yinson Production (YP).
The research house says Yinson's plans for the listing of YP in the United States equity markets in five years' time, which would be the key exit plan for Abu Dhabi Investment Authority, British Columbia Investment Management Corporation and RRJ Capital.
'We believe that the listing of YP could yield significant capital gains for Yinson, as it could also do an offer for sale of YP during the initial public offering.
'This is probably the rationale for the potential privatisation of Yinson,' the research house explained.
The research house believes that the Lim family would likely at least maintain its 27% equity stake in Yinson if Stonepeak Partners comes in as an equity partner.
Alternatively, Stonepeak Partners may provide a loan to the Lim family to privatise Yinson, in which case the Lim family may ultimately hold 100% of Yinson.
Generally, analysts are positive on Yinson with 'buy' calls but some have lowered its 12-month target price from RM3.62 to RM3.41 due to short-term engineering, procurement, construction, installation, and commissioning weakness.
However, consensus still sees substantial upside with target prices for Yinson ranging from RM3.12 (bearish) to RM5.05 (bullish), with a consensus of RM3.78 – implying a 62% upside from current levels.
Maybank Investment Bank Research (Maybank IB) is positive on Yinson, backed by its robust prospects and to benefit from FPSO bids in FY26.
'We believe the FPSO market is currently in the 'Golden Age' due to a robust global tender pipeline with an expected 13 awards over the next 12 months.
'Yinson may be looking for one new job next year (FY26) in the mid-sized segment for bankable projects with high upfront payment from end-clients,' Maybank IB notes.
As such, the RM9bil figure with hefty premium appears justifiable for a strategic asset with strong recurring cash flows, particularly in today's market of yield-hungry infrastructure investors.
Yinson's valuation, at first glance, seems to reflect investor caution: high debt, negative free cash flow, and macro headwinds.
But deeper analysis reveals a fundamentally solid business with long-term income visibility and expansion into renewables.
If leveraged effectively, these factors could drive a significant re-rating.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
10 minutes ago
- New Straits Times
China starts construction of Tibet mega-dam
BEIJING: China started building a mega-dam Saturday on a river running through Tibet and India, with Premier Li Qiang attending the commencement ceremony, state media said. Beijing approved the project in December on the river – known as Yarlung Tsangpo in Tibet and Brahmaputra in India – linking it to the country's carbon neutrality targets and economic goals in the Tibet region. "The electricity generated will be primarily transmitted to other regions for consumption, while also meeting local power needs in Tibet," state news agency Xinhua reported after the groundbreaking ceremony in southeastern Tibet's Nyingchi. Once built, the dam could dwarf the record-breaking Three Gorges Dam on the Yangtze River in central China – and have a potentially serious impact on millions of people downstream in India and Bangladesh. The project will entail constructing five hydropower stations, with the total investment estimated to be around 1.2 trillion yuan (US$167.1 billion), Xinhua said. India said in January it had raised concerns with China about the project in Tibet, saying it will "monitor and take necessary measures to protect our interests." China "has been urged to ensure that the interests of the downstream states of the Brahmaputra are not harmed by activities in upstream areas", India's foreign ministry said then. In December, Beijing's foreign ministry said that the project would not have any "negative impact" downstream, adding that China "will also maintain communication with countries at the lower reaches" of the river. Besides downstream concerns, environmentalists have also warned about the irreversible impact of such mega projects in the ecologically sensitive Tibetan plateau. Both India and China, neighbours and rival Asian powers, share thousands of kilometres of disputed borders, where tens of thousands of soldiers are posted on either side.
New Straits Times
an hour ago
- New Straits Times
Sabah Blue Economy on track to yield RM3.25bil annually from marine harvests
KOTA KINABALU: The Sabah Blue Economy is estimated to yield 491,000 tonnes of marine harvests such as fish and prawns annually, with a value of RM3.25 billion, said Chief Minister Datuk Seri Hajiji Noor. He said marine harvesting is one of 14 components of the Blue Economy that can be explored, such as renewable ocean energy, blue carbon, tourism, maritime transport, and marine biotechnology, among others. "There is more to Blue Economy than just deep-sea harvesting," he said in a speech read by Sabah Finance Minister Datuk Seri Masidi Manjun at the International Business Review (IBR) ASEAN Awards here yesterday. Also present was IBR Asia Group founder, director and chief executive officer Datuk Beatrice Nirmala. The chief minister also said that one of the most exciting aspects of ocean energy is the Ocean Thermal Energy Conversion (OTEC), which harnesses energy from the oceans. "OTEC power plants are currently being planned to span across 500km of coastline and, in time, to be able to generate 20,000MW of green energy, an unprecedented scale globally. This is not only a gamechanger for the country, it is a gamechanger for the region," he said. Hajiji said the Blue Economy Industrial Park has been established in Kudat as part of three new industrial parks approved by the state government, along with Kota Belud and Beaufort, all strategically located to grow investment opportunities. On the investment front, Hajiji said Sabah had recorded RM17.41 billion from 73 companies in overall approved foreign and domestic investments in the manufacturing sector since September 2020, with 52 companies already setting up businesses in the state with a total investment of RM7.8 billion, creating 3,636 jobs. Between 2022 and 2024, Sabah received new investment proposals worth an additional RM42.3 billion, which will create 32,996 jobs, he added. The chief minister highlighted that Sabah had sealed the Commercial Collaborative Agreement with Petronas, allowing the state to have more participation in the oil and gas industry. This includes 50 per cent equity from the Samarang oil and gas field, 25 per cent equity from Samur, and a 25 per cent equity in the US$3.1 billion (US$1=RM4.24) floating liquefied natural gas (ZLNG) investment in Sipitang. To support the growing investments, the state government has launched the Sabah Energy Roadmap and Master Plan 2040. This initiative aims to generate 700MW within the next 1 to 2 years. Additionally, the government has allocated RM679.85 million in 2024 to address immediate water shortages. Long-term plans also include the completion of the Ulu Padas hydropower. Meanwhile, nine winners were announced at the event, namely Institut Jantung Negara for corporate excellence in the healthcare sector, Clean Kinetics Pte Ltd for corporate excellence in the renewable energy sector, Millenium Minerals Ltd for corporate excellence in the mining industry, Sabah Port Sdn Bhd for corporate excellence in the logistics sector, AiRTS Pte Ltd for innovative technology in the artificial intelligence sector, Alpine Integrated Solution Sdn Bhd for corporate excellence in the event management sector, and Education Malaysia Global Services for corporate excellence in the education sector. Negeri Sembilan was named Most Progressive State in Malaysia in 2024, while Sabah was recognised as the Most Outstanding State in Malaysia for 2024.
Borneo Post
4 hours ago
- Borneo Post
Malaysia timber trade hits RM9.95 bln in Q1 2025, eyes RM4 bln furniture exports by 2030
Zainal (seated centre) joins members of the newly installed SFIA 2025-2028 committee for a group photo. KUCHING (July 20): Malaysia's total trade value for timber and timber products, including exports and imports, reached RM9.95 billion in the first four months of this year, said Sarawak Timber Industry Development Corporation (STIDC) general manager Zainal Abidin Abdullah. He said exports contributed RM7.18 billion, signifying a strong demand for Malaysian timber products, while imports stood at RM2.767 billion, reflecting healthy domestic use and a well-connected supply chain. Wooden furniture took the lead in exports, bringing in RM3 billion, followed by plywood (RM742.5 million), sawn timber (RM582.5 million), and fibreboard (RM210 million). 'Last year, our timber exports reached RM22.9 billion, a solid 4.9 per cent increase from the previous year. This steady growth shows how resilient and adaptable our industry truly is,' Zainal said during the Sarawak Furniture Industry Association's (SFIA) 17th committee installation dinner held at Borneo Convention Centre Kuching on Friday. He said Sarawak's timber export earnings reached RM2.84 billion last year, a slight decrease from RM3.14 billion in 2023. 'More than numbers, these achievements underscore the timber industry's important role not only in driving Malaysia's economy but also in creating jobs and supporting communities, especially in rural areas,' he said. According to Zainal, innovation in design remains vital as Sarawak adapts to changing market trends, while efforts to expand market access through trade fairs and export programmes are opening doors worldwide. However, he pointed out that material shortages are a significant hurdle, with Malaysia importing up to 60 per cent of its raw materials like timber, hardware, and fabrics. 'Sarawak, despite its rich timber resources, often exports raw wood rather than finished products, limiting value-added opportunities. 'In addition, our industry relies heavily on foreign workers, which affects skills retention and innovation. Locally, there is a shortage of skilled craftsmen and designers, which slows productivity and the adoption of new technologies,' he added. Zainal also said Sarawak faces competition from emerging markets, such as China and Vietnam, while limited access to advanced technology and a small domestic market restrict growth. He added that environmental regulations and concerns about deforestation add further complexity, requiring sustainable practices that can be costly and difficult to implement. 'Despite these challenges, there is great potential for Sarawak's furniture industry, which can carve out a stronger position in the global market by investing in skills development, innovation, and sustainable practices,' he emphasised. On STIDC, Zainal said a comprehensive Furniture Industry Blueprint has been developed to map out a clear, strategic pathway for the sector's growth, encompassing product development, supply chain strengthening, and market expansion. 'In collaboration with the SFIA, STIDC is actively compiling a detailed database of member companies and their offerings, which will serve as a foundation for this blueprint. 'Through joint brainstorming sessions, we aim to establish a robust and integrated supply chain that supports our ambition to achieve RM4 billion in furniture export revenue by 2030,' he added. Meanwhile, SFIA president Leo Chiang said the furniture industry in Sarawak is facing an increasingly complex landscape, shaped by global and local shifts. 'Challenges – including the US tariffs affecting exports, Malaysia's expanded SST (Sales and Services Tax) raising operational costs, and the introduction of FWTA (Foreign Workers Transformation Approach) in Sarawak – add intense pressure and demand closer collaboration with stakeholders. 'Now, more than ever, we must work together to stay resilient and competitive,' he stressed. Chiang also said they look forward to even closer cooperation with STIDC in shaping policies, facilitating training, supporting innovation, and promoting Sarawak-made furniture on the global stage. 'We must also remain committed to developing our SMEs (small and medium enterprises), uplifting design capabilities, embracing sustainable practices, and grooming the next generation of industry players,' he added. *Editor's note: This article has been amended for accuracy. lead stidc timber trade Zainal Abidin Abdullah
