Dialog records high quarterly earnings increase of 17pc YoY - The Malaysian Reserve


DIALOG GROUP BHD
FYE JUNE FY15 FY16 FY17F FY18F
REVENUE (RM mil) 2,358.2 2,534.5 2,676.0 2,650.0
NET PROFIT (RM mil) 275.1 294.9 270.3 273.0
EPS (sen) 5.5 5.6 5.3 5.3
PER (x) 27.6 27.3 29 28.6

 

Dialog records high quarterly earnings increase of 17pc YoY
16 Feb, 2017
Source: The Malaysian Reserve

 

â–ºRecommendation: Neutral
TARGET Price: RM1.68

by MIDF Research (Feb 15)

Investment Highlights DIALOG Group Bhd reported 2QFY17 earnings increased by +17.1% YoY to RM91.4m. The large portion of the profits were derived locally amid a challenging global environment.

In particular, the strong earnings were derived from jobs in Pengerang, Johor, while partly supported by the storage tank business which contributed RM50.1m for 6MFY17.

Excluding gains on disposal of assets amounting to RM22.3m, the group's normalised earnings of RM152.4 came in within our and consensus estimates, accounting for 55% and 49% of full-year FY17 earnings expectations respectively.

Tank farm business going strong. The company noted that the commendable rise in profit was largely due to its tank farm business which was fully leased with better storage rates.

In addition to that, the Malaysian operations were buoyed by ongoing works at Pengerang Deepwater Terminal Phase 2, Jetty Topside works for Samsung and the construction of the plasticiser plant for UPC Chemicals (M) Sdn Bhd.

Margins intact. The company's 2QFY17 net profit margin remains healthy above >10%, while 6MFY17 blended net profit margin is at 11.4%.

Impact on earnings. We are maintaining our FY17 and FY18 earnings forecasts at this juncture.

Maintain 'Neutral'. For the past 24-months, Dialog's share price has been unexciting, trading within the narrow band of RM1.44-RM1.70 per share.

At current price, we believe that the company's capital upside is limited without significant rerating catalysts.

We are maintaining our 'Neutral' recommendation with an unchanged TP of RM1.68 per share. This represents an implied forward PER of 28.6x.

Our valuation is based on a sum-of-parts method pegging a PER of 20x to its core businesses ie engineering, procurement, construction and commissioning, plant maintenance, specialist and catalyst.

As for the centralised tankage facilities business, our discounted cashflow is based on a discount rate of 8%.


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