Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: MAYBANK
Dialog Group Bhd
(Feb 17, RM2.20)
Maintain buy at RM2.13 with target price RM2.60: Dialog's 2QFY11 net profit of RM36 million (+9% quarter-on-quarter) took 1H earnings to RM69 million (+24% year-on-year), on track to meet our forecasts. We remain optimistic about Dialog's long-term growth prospects, driven by its centralised tankage facility (CTF) projects in Pengerang. Dialog is also touted to be in the running to co-develop Petronas' marginal oilfield projects, a major positive in our view. We maintain our 'buy' call with an unchanged RM2.60 sum-of-parts (SOP) target price.
1HFY11 net profit of RM69 million (+24% y-o-y) on improved earnings before interest, tax, depreciation and amortisation (Ebitda) margin (+3.6 percentage points y-o-y; 14.9%) but lower revenue (-9% y-o-y) accounts for 50% of our and 47% of consensus full-year estimates. Geographically, all divisions reported growth. Overseas operations reported stronger pre-tax growth (+46% y-o-y) than domestic (+14%), but the latter's contribution (RM47 million) was 2.8 times the former's RM22 million.
Associates' profits grew 32% y-o-y to RM20 million in 1H, accounting for 22% of group pre-tax profit. The underlying strength was largely driven by its 30%-owned CTF operations in Kertih, Terengganu. Although earnings from the CTF operations are equity accounted, it provides Dialog with growing income stream, cash flows and dividends. No dividend was declared in 2Q. Dialog remains cash rich, with RM210 million net cash, which equals 11 sen per share.
We retain our FY11/13 earnings forecasts, which imply a 3-year net profit compound annual growth rate of 10%. There is ample room to upgrade, for we have not incorporated potential earnings from its Pengerang CTF operations (10 times the size of Kertih CTF), Saudi Arabia supply base, and Phase 3 and beyond for the Tanjung Langsat CTF into our forecasts.
Our target price is based on a SOP valuation, which has incorporated one million cu m of production from the Pengerang CTF (20% of full capacity). Pending the necessary environmental approvals, the Pengerang CTF (part of the Economic Transformation Programme) is scheduled to break ground in April and to complete the first phase by end-2012 or early 2013. ' Maybank IB Research, Feb 17
This article appeared in The Edge Financial Daily, February 18, 2011.
Company Name: DIALOG GROUP BHD
Research House: MAYBANK
Dialog Group Bhd
(Feb 17, RM2.20)
Maintain buy at RM2.13 with target price RM2.60: Dialog's 2QFY11 net profit of RM36 million (+9% quarter-on-quarter) took 1H earnings to RM69 million (+24% year-on-year), on track to meet our forecasts. We remain optimistic about Dialog's long-term growth prospects, driven by its centralised tankage facility (CTF) projects in Pengerang. Dialog is also touted to be in the running to co-develop Petronas' marginal oilfield projects, a major positive in our view. We maintain our 'buy' call with an unchanged RM2.60 sum-of-parts (SOP) target price.
1HFY11 net profit of RM69 million (+24% y-o-y) on improved earnings before interest, tax, depreciation and amortisation (Ebitda) margin (+3.6 percentage points y-o-y; 14.9%) but lower revenue (-9% y-o-y) accounts for 50% of our and 47% of consensus full-year estimates. Geographically, all divisions reported growth. Overseas operations reported stronger pre-tax growth (+46% y-o-y) than domestic (+14%), but the latter's contribution (RM47 million) was 2.8 times the former's RM22 million.
Associates' profits grew 32% y-o-y to RM20 million in 1H, accounting for 22% of group pre-tax profit. The underlying strength was largely driven by its 30%-owned CTF operations in Kertih, Terengganu. Although earnings from the CTF operations are equity accounted, it provides Dialog with growing income stream, cash flows and dividends. No dividend was declared in 2Q. Dialog remains cash rich, with RM210 million net cash, which equals 11 sen per share.
We retain our FY11/13 earnings forecasts, which imply a 3-year net profit compound annual growth rate of 10%. There is ample room to upgrade, for we have not incorporated potential earnings from its Pengerang CTF operations (10 times the size of Kertih CTF), Saudi Arabia supply base, and Phase 3 and beyond for the Tanjung Langsat CTF into our forecasts.
Our target price is based on a SOP valuation, which has incorporated one million cu m of production from the Pengerang CTF (20% of full capacity). Pending the necessary environmental approvals, the Pengerang CTF (part of the Economic Transformation Programme) is scheduled to break ground in April and to complete the first phase by end-2012 or early 2013. ' Maybank IB Research, Feb 17
This article appeared in The Edge Financial Daily, February 18, 2011.
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