Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: OSK
Dialog Group Bhd
(May 13, RM1.09)
Maintain buy at RM1.07 with higher target price of RM1.29: Dialog's 3QFY10 results were within consensus but above our expectations, making up 80% and 85% of FY10 forecasts respectively. The better-than-expected numbers were mainly contributed by strong performance at all its divisions, especially the engineering and construction as well as plant maintenance divisions.
We believe the engineering and construction division got a boost from jobs related to the Langsat Terminal. Going forward, we believe there will be more jobs going to this division, especially when the independent deepwater storage terminal for oil products in Pengerang, Johor is ready for development.
Meanwhile, we believe its plant maintenance division will shine all year round, especially when there are not many new O&G projects in the pipeline and its customers would rather spend minimal capital expenditure to ensure that existing plants are operating at maximum efficiency.
Besides that, the good results were also due to Dialog having executed higher-margin jobs, which bolstered 3QFY10 net profit by 11.2% quarter-on-quarter (q-o-q) to RM31.8 million, although revenue rose marginally by 2.6% to RM282.8 million. Both FY10 revenue and net profit surged 15.7% to RM867.2 million and 41.7% to RM87.4 million respectively year to date, which were in tandem with the better operating environment following the recovery in the global economy and crude oil price.
We understand that the tanks in Phase 1 of the Langsat Terminal are about 30% utilised and the management expects to break even in 1-2 years' time.
This is based on an expected average turn of one time per month. As for Phases 2 and 3, we understand that Dialog is still in the midst of negotiating with potential customers.
We have also upgraded our FY10-FY11 earnings by 7%-14% in line with the improvement in its quarterly performance. Hence, our target price is accordingly upgraded to RM1.29 (previously RM1.17) based on a sum-of-parts valuation. Dialog is one of the most defensive O&G stocks within its sector, with a steady business model and net cash of RM203 million as at March 31, 2010 versus RM140.8 million as at Dec 31, 2009. It also provides an attractive dividend yield of about 5%. - OSK Research, May 13
This article appeared in The Edge Financial Daily, May 14, 2010.
Company Name: DIALOG GROUP BHD
Research House: OSK
Dialog Group Bhd
(May 13, RM1.09)
Maintain buy at RM1.07 with higher target price of RM1.29: Dialog's 3QFY10 results were within consensus but above our expectations, making up 80% and 85% of FY10 forecasts respectively. The better-than-expected numbers were mainly contributed by strong performance at all its divisions, especially the engineering and construction as well as plant maintenance divisions.
We believe the engineering and construction division got a boost from jobs related to the Langsat Terminal. Going forward, we believe there will be more jobs going to this division, especially when the independent deepwater storage terminal for oil products in Pengerang, Johor is ready for development.
Meanwhile, we believe its plant maintenance division will shine all year round, especially when there are not many new O&G projects in the pipeline and its customers would rather spend minimal capital expenditure to ensure that existing plants are operating at maximum efficiency.
Besides that, the good results were also due to Dialog having executed higher-margin jobs, which bolstered 3QFY10 net profit by 11.2% quarter-on-quarter (q-o-q) to RM31.8 million, although revenue rose marginally by 2.6% to RM282.8 million. Both FY10 revenue and net profit surged 15.7% to RM867.2 million and 41.7% to RM87.4 million respectively year to date, which were in tandem with the better operating environment following the recovery in the global economy and crude oil price.
We understand that the tanks in Phase 1 of the Langsat Terminal are about 30% utilised and the management expects to break even in 1-2 years' time.
This is based on an expected average turn of one time per month. As for Phases 2 and 3, we understand that Dialog is still in the midst of negotiating with potential customers.
We have also upgraded our FY10-FY11 earnings by 7%-14% in line with the improvement in its quarterly performance. Hence, our target price is accordingly upgraded to RM1.29 (previously RM1.17) based on a sum-of-parts valuation. Dialog is one of the most defensive O&G stocks within its sector, with a steady business model and net cash of RM203 million as at March 31, 2010 versus RM140.8 million as at Dec 31, 2009. It also provides an attractive dividend yield of about 5%. - OSK Research, May 13
This article appeared in The Edge Financial Daily, May 14, 2010.
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