Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: MAYBANK
Dialog Group Bhd
(Aug 20, RM1.10)
Upgraded to buy with higher target price of RM1.25: We have upgraded Dialog to a 'buy', with a higher RM1.25 sum-of-parts-based target price, following an 18% to 19% rise in our FY2011/12 earnings forecasts, as the midterm outlook is turning positive, helped by early contributions from its new Tanjung Langsat operations. This expansion will drive earnings and cash flows and eventually higher dividends. The successful execution of the Pengerang tank farm and its Saudi Arabia supply base plans are further re-rating catalysts.
The 4QFY10 net profit of RM29 million ' a drop of 5% year-on-year (y-o-y) and 10% quarter-on-quarter (q-o-q) ' took FY10 earnings to RM116 million (a 26% y-o-y rise), ahead of our RM101 million expectation but within consensus' RM112 million. Dialog declared a final dividend per share (DPS) of 1.8 sen, which lifted full-year DPS to 3.1 sen.
The stronger-than-expected 4Q performance was fuelled by higher associates profit contribution (a 28% q-o-q rise to RM11 million). We think the outperformance came from its Tanjung Langsat tank terminal business, which commenced operations in April and has started to contribute ahead of expectations. We had initially projected a startup loss for this.
Despite a 17% q-o-q decline in 4Q turnover, the domestic operations (ex-associates) turned in higher pretax profit (a 34% q-o-q rise) on margin expansion (7.1 percentage points higher q-o-q). It accounted for 66% of group pretax profit in 4Q. This negates a lower pretax earnings from its overseas operations (an 85% q-o-q drop).
We have raised our FY2011/12 earnings forecasts by 18% to 19%, taking into account the earlier-than-expected earnings contributions from its 30% stake in the Tanjung Langsat operations, a sustainable growing income stream.
We also lift our FY2011/12 DPS forecasts by 17% to 20%, based on a 55% net profit payout. Operationally, Dialog is well-positioned to leverage onto Petronas' upcoming engineering and construction and downstream operations ' namely Sabah Oil and Gas Terminal, catalyst handling and maintenance services ' over the next few years. ' Maybank IB Research, Aug 20
This article appeared in The Edge Financial Daily, August 23 2010.
Company Name: DIALOG GROUP BHD
Research House: MAYBANK
Dialog Group Bhd
(Aug 20, RM1.10)
Upgraded to buy with higher target price of RM1.25: We have upgraded Dialog to a 'buy', with a higher RM1.25 sum-of-parts-based target price, following an 18% to 19% rise in our FY2011/12 earnings forecasts, as the midterm outlook is turning positive, helped by early contributions from its new Tanjung Langsat operations. This expansion will drive earnings and cash flows and eventually higher dividends. The successful execution of the Pengerang tank farm and its Saudi Arabia supply base plans are further re-rating catalysts.
The 4QFY10 net profit of RM29 million ' a drop of 5% year-on-year (y-o-y) and 10% quarter-on-quarter (q-o-q) ' took FY10 earnings to RM116 million (a 26% y-o-y rise), ahead of our RM101 million expectation but within consensus' RM112 million. Dialog declared a final dividend per share (DPS) of 1.8 sen, which lifted full-year DPS to 3.1 sen.
The stronger-than-expected 4Q performance was fuelled by higher associates profit contribution (a 28% q-o-q rise to RM11 million). We think the outperformance came from its Tanjung Langsat tank terminal business, which commenced operations in April and has started to contribute ahead of expectations. We had initially projected a startup loss for this.
Despite a 17% q-o-q decline in 4Q turnover, the domestic operations (ex-associates) turned in higher pretax profit (a 34% q-o-q rise) on margin expansion (7.1 percentage points higher q-o-q). It accounted for 66% of group pretax profit in 4Q. This negates a lower pretax earnings from its overseas operations (an 85% q-o-q drop).
We have raised our FY2011/12 earnings forecasts by 18% to 19%, taking into account the earlier-than-expected earnings contributions from its 30% stake in the Tanjung Langsat operations, a sustainable growing income stream.
We also lift our FY2011/12 DPS forecasts by 17% to 20%, based on a 55% net profit payout. Operationally, Dialog is well-positioned to leverage onto Petronas' upcoming engineering and construction and downstream operations ' namely Sabah Oil and Gas Terminal, catalyst handling and maintenance services ' over the next few years. ' Maybank IB Research, Aug 20
This article appeared in The Edge Financial Daily, August 23 2010.
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