Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Dialog Group Bhd
(Aug 15, RM2.61)
Maintain buy at RM2.52 with target price of RM3.35: Dialog's results were ahead of our expectation on the back of a strong 4QFY11. We have raised our FY12/FY13 earnings forecasts by up to 28% (with further upside potential) and we remain optimistic on its long-term growth prospects. Dialog remains among our preferred 'buys' in the oil and gas sector with an unchanged RM3.35 target price (sum-of-parts valuation). We continue to like its business model, focused management and steady dividend payments.
Net profit for 4QFY11of RM45 million (+17% quarter-on-quarter [q-o-q]) took FY11 earnings to RM152 million (+29% year-on-year [y-o-y]), ahead of our RM138 million forecast but within consensus. The outperformance came from stronger than expected associate's profits. Q-o-q, the underlying growth was driven by the domestic (pre-tax profit: +10% q-o-q) and overseas (+54% q-o-q) operations as well as higher associate contributions (+6% q-o-q) from 30% owned Kerteh Terminals Sdn Bhd and domestic engineering and construction earnings. Dialog remains cash rich, with RM168 million in net cash (8.4 sen per share). It declared a final single-tier dividend per share of 1.8 sen (unchanged y-o-y), bringing its total payout to 3.1 sen for FY11.
We have raised our FY12/FY13 earnings forecasts by between 12% and 28%, taking into account the strong 4QFY11 performance, which we think is sustainable. We have revised our assumptions on Kertih Terminals to derive the upgraded profits. We now expect Dialog to deliver RM192 million in net profit in FY12 and RM202 million in FY13, which implies a 15% two-year compound annual growth rate. There is room for an earnings upgrade for we have not incorporated: (i) its potential involvement in new marginal field developments; (ii) full earnings potential from the new Pengerang centralised tank farm (CTF) project; (iii) its involvement in a new Saudi Arabia supply base; and (iv) expansion of the existing Tanjung Langsat CTF (Phase 3 and beyond).
Dialog is strongly tipped to be the next local candidate to develop Petroliam Nasional Bhd (Petronas) marginal oilfield projects on a risk sharing contract (RSC) basis. A consortium comprising Dialog and Roc Oil Co Ltd is understood to have secured two letters of intent from Petronas for two marginal field developments ' Balai and Bentara ' and is in the process of finalising the terms. ' Maybank IB Research, Aug 15
This article appeared in The Edge Financial Daily, August 16, 2011.
Company Name: DIALOG GROUP BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 3.35 |
Dialog Group Bhd
(Aug 15, RM2.61)
Maintain buy at RM2.52 with target price of RM3.35: Dialog's results were ahead of our expectation on the back of a strong 4QFY11. We have raised our FY12/FY13 earnings forecasts by up to 28% (with further upside potential) and we remain optimistic on its long-term growth prospects. Dialog remains among our preferred 'buys' in the oil and gas sector with an unchanged RM3.35 target price (sum-of-parts valuation). We continue to like its business model, focused management and steady dividend payments.
Net profit for 4QFY11of RM45 million (+17% quarter-on-quarter [q-o-q]) took FY11 earnings to RM152 million (+29% year-on-year [y-o-y]), ahead of our RM138 million forecast but within consensus. The outperformance came from stronger than expected associate's profits. Q-o-q, the underlying growth was driven by the domestic (pre-tax profit: +10% q-o-q) and overseas (+54% q-o-q) operations as well as higher associate contributions (+6% q-o-q) from 30% owned Kerteh Terminals Sdn Bhd and domestic engineering and construction earnings. Dialog remains cash rich, with RM168 million in net cash (8.4 sen per share). It declared a final single-tier dividend per share of 1.8 sen (unchanged y-o-y), bringing its total payout to 3.1 sen for FY11.
We have raised our FY12/FY13 earnings forecasts by between 12% and 28%, taking into account the strong 4QFY11 performance, which we think is sustainable. We have revised our assumptions on Kertih Terminals to derive the upgraded profits. We now expect Dialog to deliver RM192 million in net profit in FY12 and RM202 million in FY13, which implies a 15% two-year compound annual growth rate. There is room for an earnings upgrade for we have not incorporated: (i) its potential involvement in new marginal field developments; (ii) full earnings potential from the new Pengerang centralised tank farm (CTF) project; (iii) its involvement in a new Saudi Arabia supply base; and (iv) expansion of the existing Tanjung Langsat CTF (Phase 3 and beyond).
Dialog is strongly tipped to be the next local candidate to develop Petroliam Nasional Bhd (Petronas) marginal oilfield projects on a risk sharing contract (RSC) basis. A consortium comprising Dialog and Roc Oil Co Ltd is understood to have secured two letters of intent from Petronas for two marginal field developments ' Balai and Bentara ' and is in the process of finalising the terms. ' Maybank IB Research, Aug 15
This article appeared in The Edge Financial Daily, August 16, 2011.
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