KUALA LUMPUR: MISC Bhd’s proposed RM7.31 billion acquisition of Yinson Holdings Bhd could mark a major expansion of its offshore business, giving the shipping and energy solutions group access to a fleet of 11 offshore production and storage vessels and a US$19.3 billion contracted revenue backlog.
The proposed deal offers MISC an opportunity to strengthen its floating production, storage and offloading (FPSO) capabilities, broaden its international footprint and tap into potential operational synergies, analysts said.
However, they cautioned that the strategic gains would come with higher borrowings, increased gearing and modest, or potentially negative, near-term earnings impact.
RHB Research analyst Lee Yun Leon views the acquisition as strategically positive, citing opportunities for commercial collaboration and greater exposure to key offshore markets.
He maintained a “Buy” recommendation on MISC with an unchanged sum-of-parts (SOP)-derived target price (TP) of RM9.94, implying 24 per cent upside potential and an estimated dividend yield of around 5 per cent.
In contrast, CIMB Securities analyst Muhammad Afif bin Zulkaplly sees the transaction as mildly negative in the near term, given the acquisition premium, financing costs and potential earnings dilution, although he acknowledged its longer-term strategic merits.
A consortium comprising MISC, Yinson Legacy, the investment vehicle of Yinson Holdings’ founding Lim family, and the Employees Provident Fund (EPF) has proposed to privatise Yinson via a cash offer of RM2.50 per share.
The offer covers the remaining 55.2 per cent stake, or 1.61 billion shares, not already held by the consortium, at an estimated cost of RM4.03 billion, valuing Yinson at RM7.31 billion. It represents a 10.6 per cent premium to Yinson’s last traded price of RM2.26 on Nov 6, 2026.
The transaction will be undertaken through MY Offshore Holdings (MYOH), which will become Yinson’s wholly-owned parent upon completion, paving the way for its delisting.
Under the proposed structure, MISC and Yinson Legacy will each hold a 41.464 per cent stake in MYOH, while EPF will retain an effective interest of 17.072 per cent.
MISC will contribute RM3.03 billion, funded through an indicative mix of 75 per cent bank borrowings (RM2.27 billion) and 25 per cent internal cash (RM757 million), while Yinson Legacy will contribute the remaining RM1 billion. Completion is targeted for the second half of 2027, subject to regulatory and shareholder approvals.
However, Yinson clarified that its board has yet to approve the proposal despite inadvertently including a signed acceptance page in an earlier announcement.
The clarification follows media reports suggesting that Yinson had accepted the proposed scheme outlined in a proposal letter dated Nov 6.
In a bourse filing on Tuesday, Yinson said the board has not accepted the proposed scheme or the terms set out in the proposal letter and remains in the process of deliberating on the matter.
The company explained that the copy of the proposal letter attached to its Nov 6 announcement had inadvertently included an acceptance page signed by one of its directors.
However, Yinson stressed that the signature was intended solely to acknowledge receipt of the proposal letter on behalf of the company.
Lee said the acquisition would give MISC access to Yinson’s established offshore platform, comprising eight FPSOs and three floating storage and offloading (FSO) vessels, supported by a contracted revenue backlog of approximately US$19.3 billion.
“We see potential for operational and commercial collaboration while broadening MISC’s presence across key offshore markets,” he said in a note.
The investment is expected to increase MISC’s borrowings by RM2.28 billion, lifting pro forma gearing from 0.36 times to 0.43 times. Nevertheless, net assets per share are expected to remain broadly stable at RM7.61, compared with RM7.62 previously.
The acquisition is also expected to lift MISC’s illustrative earnings per share (EPS) by 1.8 per cent, from 38.1 sen to 38.8 sen, although Yinson’s earnings contribution will be partly offset by additional financing costs.
RHB Research believes the more significant benefits will emerge over the longer term as MISC captures potential synergies and strengthens its position in the global offshore market.
CIMB Securities, however, highlighted the acquisition premium and financing burden as key near-term considerations.
Afif said the RM2.50 offer price was 10.6 per cent above the research house’s fair value for Yinson, while the transaction could dilute MISC’s FY28 EPS by 3.9 per cent in its first year after accounting for acquisition-related expenses and financing costs.
The investment is also expected to raise MISC’s FY27 net gearing to 0.28 times from 0.20 times, potentially keeping leverage elevated in the short to medium term amid the group’s heavy investment cycle.
Nevertheless, he noted that Yinson could benefit from MISC’s access to Petronas-related projects and potentially lower funding costs, while MISC could leverage Yinson’s offshore execution capabilities and established presence in South America, Africa and Vietnam.
Beyond expanding its offshore portfolio, CIMB Securities sees scope for MISC to unlock further value through the consolidation of its Offshore Business Unit with Yinson, potentially creating a larger and more competitive offshore platform.
Another opportunity lies in refinancing Yinson’s high-cost redeemable convertible preference shares (RCPS), which could lower its funding costs, although this would place additional pressure on MISC’s balance sheet.
Afif estimated that refinancing the full RM4 billion RCPS could push MISC’s net gearing to 0.39 times.
However, assuming full redemption, refinancing at funding costs of 8 per cent and 5 per cent could generate annual financing cost savings of approximately RM200 million and RM320 million, respectively, compared with the existing RCPS borrowing cost of 12.95 per cent to 13.5 per cent.
CIMB Securities also cautioned that MISC’s gearing could rise further to 0.29 times by FY29 as it funds fleet rejuvenation and executes its offshore project pipeline.
While operating cash flow is expected to broadly cover annual capital expenditure of about RM4 billion and dividend payments of RM1.6 billion to RM1.9 billion, the Yinson investment would require additional funding from MISC’s cash reserves and borrowings.
Based on MISC’s prospective 41.5 per cent stake in Yinson, an annual cash distribution of five sen per share would translate into only RM60 million, equivalent to a 2.1 per cent cash-on-cash return. This may provide limited relief in reducing MISC’s near-term leverage, Afif said.
CIMB Securities lowered its SOP-based TP for MISC to RM9.50 from RM9.55, incorporating the proposed 41.5 per cent stake in Yinson at its standalone fair value of RM2.26 per share and the financial impact of the acquisition. It also reduced its FY28 EPS forecast by 3.8 per cent to reflect the expected earnings dilution, while maintaining its “Buy” call.
The research house’s valuation does not yet incorporate potential synergies from the acquisition, which could provide additional upside over the longer term.