RHB Research raises target price for Dialog - The Star
29 Dec 2017
Source: The Star
PETALING JAYA: RHB Research remains positive on Dialog Group Bhd as it expects the company to sustain its growth in earnings. This is due to the expansion at its tank terminal facilities in the long run.
In a report, the research firm said that it has raised the company's target price to RM2.97 (from RM2.36 previously) to account for Dialog's expansion plans.
Recall that the oil and gas services group is buying the remaining 45% interest in Centralised Terminal Sdn Bhd (CTSB) in Tanjung Langsat and announced plans to expand its total capacity in the area to 900,000 cu m.
"The purchase consideration is RM127mil. Including a S$149.8mil (about RM487.8mil) provision of cash flow deficiency support for project financing secured by the joint-venture, the total cost of acquisition amounts to MYR614.8mil.
"As this is below our discounted cash flow (DCF) valuation for a 44% stake in CTSB of MYRlbil, this suggests that the acquisition is value accretive," the research firm said.
An additional 430,000 cu m is expected to be added to the current Phase 1 of the Pengerang Independent Terminal.
Phase 1 of the Pengerang Deepwater Terminal (PDT), with 1.3m cu m of capacity, has been operational since 2014.
However, the terminal's further capacity expansion - by an additional 430,000 cu m - is currently on track to be commissioned progressively from 2019.
Phase 2 of the PDT - a dedicated terminal for Petronas with 2m cu m capacity - is progressing within schedule, and is slated for completion by end-2019.
The research firm believes that Dialog is likely to proceed with a further expansion of its tank terminal capacity of 1.2m cu m gradually (expected to start in 2022) as demand for petroleum products and crude oil storage space would be strong upon completion of the many petrochemical facilities in the area.
Going by this it has revised its FY18-20 forecast earnings upwards by 5.3%, 3.7% and 2.7% respectively to account for consolidation of the remaining 45% stake in CTSB, post completion of the acquisition.
Shares of Dialog closed two sen up at RM2.53.