IEV

IEV: disappointing FY12 results. Revenue at RM 316.4m, +292%, due to an increase in revenue contribution of RM 231.6m from the Offshore Engg sector (execution of two turnkey contracts in decommissioning and a RM 250m turnkey contract for the Supply, Delivery, Installation and Commissioning of the Refurbished Wellhead Platform, Pipeline and Host Tie-In for D21 project) and RM 4m from the Mobile Natural Gas sector with a 6.9% increase in volume of CNG. Gross margins collapsed to 5.7% from 30.3%, due to the gross loss sustained by the D21 project as the group carried out certain additional works. The led to a loss of $4.2m, vs net profit of $11.2m the previous yr. The group is currently seeking cost recovery from the relevant parties for up to RM 33m, though this is subject to negotiations and there is no assurance that there will be mat’l recovery of the costs. Mgt is optimistic that the outlook of the oil and gas industry is positive in the next 12 mths, particularly in the Asian region. Believes its Offshore Engg sector can benefit from the significant no. of new projects currently under devt throughout the Asian region, as local govts are pushing for oil exploration & pdtn to slow down the pdtn decline from mature oil fields, as well as investing in gas fields. In addition, the group intends to merge its Mobile Natural Gas business and E&P business under the Petroleum sector. The Group is submitting a work program for the Pabuaran KSO based on an early production scheme from the previous discoveries and expects to achieve first hydrocarbon production in 1Q14. The Group also continues to work towards securing its stranded gas sources to increase the sales volume of CNG and the profitability of its Mobile Natural Gas business in West Java. Sales of CNG are expected to further increase due to higher demand from both existing and new customers. Lastly, IEV also intends to enter into the Renewable Energy Sector, through a biomass project in Vietnam. Separately, mgt provides further details on its ancmt dated 19 Dec 2012. Its 49% associate, IEV Msia, has been awarded a Letter of Award to transport and install an Integrated Tension Leg Platform from Sabah Shell Petroleum Co, in the Malikai fields offshore Sabah, Msia, valued at ~US$100m over a three yr period. A formal contract is expected to be signed on a later date. IEV’s order book currently amounts to approx RM374 m. There is no final div, though interim div of RM 0.66 sen translates to 0.7 % yield. The stock is down 8.8% at $0.465. IEV trades at 3.0x P/B.