IEV Clinches LOA for Offshore Contract

IEV Holdings offers integrated offshore engineering to support the offshore O&G industry. The company provides engineering services to companies in the offshore O&G sector, namely, offshore platform operators and EPCIC contractors. IEV also distributes off-pipeline natural gas in Indonesia and Vietnam.

The stock has rebounded twice from its support level at S$0.435, and could test the next resistance at S$0.62 if it breaks above S$0.54.

What’s New
- Clinches LOA for offshore contract. IEV’s 49%-owned associate, IEV (Malaysia) Sdn. Bhd. has received a Letter of Award (LOA) for a major transportation and installation project by an established oil and gas (O&G) operator for a deepwater facility in the Southeast Asian region. The project is scheduled to commence in Jan 13 and is expected to be completed in three years.

- Blue-chip partner. IEV will be executing the project in cooperation with Heerema Marine Contractors of the Netherlands, a world renowned marine contractor in installing complex offshore infrastructures in shallow water, deepwater and ultra deepwater.

Stock Impact
- Priced into forecast. Although contract details have not been disclosed, we estimate the total contract value to be in the range of RM400m-500m, recognisable over three years. Our earnings forecast has already factored in profit contribution from this project.

- Capital raising on the cards? On 28 Nov 12, IEV terminated an agreement for Altfield Global Resources Ltd to invest in IEV Energy Investments, a wholly-owned subsidiary of IEV. As a result, we believe the group will need to raise US$10m-15m to develop its upstream business. As IEV is currently in a net cash position, the capital requirements could be funded by a combination of debt and equity.

Earnings Revision
- Forecasts unchanged. We maintain our earnings forecasts as we have already factored in profit contribution from this project.

Valuation
- Maintain HOLD with a lower target price of S$0.54 (previously S$0.55), due to lower market value of IEV’s associate CNG Vietnam. We value IEV based on the sumof- the-parts methodology, consisting of: a) the offshore engineering and natural gas distribution segments, valued at 9.5x and 11.8x 2013F PE respectively, at a 20% discount to peers’, and b) market value of IEV’s 20.5% stake in listed associate CNG Vietnam.