25 Sep, 2017
Source: The Star

By Amlnvestment Bank
Buy (maintained)
Fair value: RM2.45

AMINVESTMENT Bank is reiterating its "buy" recommendation on Dialog with a higher sum-of-parts-based fair value of RM2.4 per share (from an earlier RM2.24 per share), which implies a 2018 price-toearnings ratio of 35 times, which is 24% below its five-year average.

The research house said the higher valuation was driven by assumptions for an additional one million cubic metres (m3) of storage for Dialog's 45.9% stake in Pengerang Deepwater Terminal (PDT).

"In August this year, its partner Vopak announced that phase one will be progressively expanded from the first quarter of 2019 by 430,000 cu m for clean petroleum products, raising its total capacity by 33% to 1.7 million cu m."

Amlnvestment Bank said the increased valuation was based on the assumption that phase three, which Dialog is still in the process of negotiating with off-takers, will have the same storage capacity and equity stakes as phase two's 2.1 million cu m.

"We have also raised Dialog's 2018 to 2020 earnings by 5% to 8%.

"This incorporates higher contributions from Pengerang phase one and an increase of RMlOOmil for the group's 2018 to 2020 engineering, procurement and construction order book assumption."

Meanwhile, the research house said the RM5.5bil contract for the construction of the RM6.3bil PDT phase two currently occupies Dialog's fabrication, engineering and construction division.

This will underpin the group's earnings over the next two years.

"The progress of PDT phase two is on track as the Refinery and Petrochemical Integrated Development complex remains on schedule with progressive completion in 2018 to 2019.

"Additionally, the RM2.7bil liquified natural gas regasification plant and storage tanks, in which Dialog has a 25% equity stake, are scheduled for progressive completion starting in the fourth quarter to the second quarter of 2018."