20 August 2018
Source: The Star

By RHB Research


DIALOG'S fourth quarter financial year 2018 (FY18) core profit came at RM102.5mil, bringing FY18 earnings to RM425.5mil. This is within RHB Research's and consensus forecasts, at 103% and 95%. A final dividend per share (DPS) of 1.8 sen was declared, bringing the full-year DPS to 3.2 sen - which is within the research house's estimates.

Year-on-year, core profit in 4Q18 edged up 4% driven by contribution from Pengerang LNG and full consolidation of Langsat tank terminals. This, however, is being partially offset by weaker international business caused by lesser engineering, procurement, construction and commissioning (EPCC) works done and plant maintenance activities. Sequentially, profit was 14% lower in the quarter due to lower international business activities.

However the group's EPCC division should be busy with works from Pengerang projects alone in the next five years due to expected sustained growth plans in tank terminal facilities in the long run to cater to upcoming downstream plants in Refinery and Petrochemical Integrated Development. Phase 3 of the Pengerang tank terminal is highly likely, as the group also signed a memorandum of understanding with the Johor government to develop common tankage facilities to support the project.

Commencement of the EPCC project is still uncertain. "While the details have yet to be announced, we are cognisant that Pengerang Phase 3 will proceed, post completion of Phase 2 in end2019. Land reclamation for the project has commenced, as well as discussions with potential customers. "We have factored in an additional 5m cu m in capacity for Phase 3 tank terminals, with partial commencement expected in 2022 (Dialog's stake is assumed at 25%)," said RHB Research.

Pengerang Phase 1 is currently under expansion for additional 430,000 cubic metre capacity, with Phase 2 is still under the construction stage with expected completion in early 2019. "We maintain our earnings forecasts, but lift our sum-of-parts based target price to RM4.13 from RM3.92, as we roll forward our valuation to FY20.

"We continue to like the company for its resilient earnings, which stems from recurring income from multiple tank terminals. "Dialog is also the largest KLCI proxy to the local mid-downstream oil & gas services industry. It remains one of our top sector picks, as well. Risks to our call are a significant plunge in spot tank terminal rates and EPCC project cost overruns," said RHB Research.