AmBank maintains buy call on Dialog - Malay Mail

AmBank maintains buy call on Dialog
24 Mar, 2017
Source: Malay Mail


PETALING JAYA — AmBank Research maintained its "buy" recommendation on Dialog Group, with unchanged forecasts and a fair value of RM1.97 per share, based on a sum-of-parts (SOP) valuation which implies a 2017 forecasted price-to earnings ratio (PE) of 30x.

Dialog acquired the balance 60% equity interest in Singapore-based EC-Dialog Pte Ltd (EC-Dialog) for S$2 million (RM6.3 million) cash from Winsome Management & Services Pte Ltd, Wong Ming Wah and Tan Geok Tee.

Currently, EC-Dialog wholly owns Catalyst Handling Research & Engineering Limited, which specialised in catalyst handling, research and engineering in the United Kingdom, and has a 49% equity stake in Dialog Catalyst Services Sdn Bhd, which provides catalyst and process material handling services in Malaysia.

"Given the relatively low cash proceed, this transaction, based on net asset valuation, will not have any significant impact to the group's earnings.

"However, the additional stake in ECDialog enables the group to obtain full ownership of the research and technological know-how of catalyst handling while consolidating its catalyst handling services presence in Malaysia and Asia-Pacific region.

"Hence, we are mildly positive on this development as Dialog's catalyst handling specialists provide a one-stop solution for commissioning and maintaining catalytic reactors, vessels and columns for refinery, petrochemical and chemical facilities," said AmBank Research in a note to investors yesterday.

EC-Dialog owns a full range of patented technology which includes "closed-circuit, closed-loop" systems, ultra low attrition, zero-dust emission and zero-spillage hoppers.

At this stage, the main driver for Dialog's earnings momentum lies in its Pengerang tank terminal development in Johor.

"Recall that the group's progress on the RM6.3 billion Pengerang Deepwater Terminal Phase 2 remains on track as the refinery and petrochemical integrated development complex stays on schedule with progressive completion in 2018-2019.

"Additionally, the RM2.7 billion liquefied natural gas (LNG) regasification plant and storage tanks, in which Dialog has a 25% equity stake, are scheduled for completion by end-2017.

"For the Pengerang LNG regasification project, which will have a combined capacity of 200,000 cubic metres, the first tank will be completed by July 2017 while the second by December 2017," the research house added.

Dialog is also developing 170 acres of industrial estate to support petrochemical industries in the buffer zone between the 500-acre land being reclaimed and the Pengerang mainland.

"We have not included any potential land value accretion for the buffer zone's estimated 500 acres in our SOP, which could be raised by an additional 12 sen or 6% at a conservative assumption of RM30 per square foot.

"Dialog is trading at a 2017 PE of 27x, below its five-year peak of 29x. We view the premium as justified given Dialog's long-term recurring cash flow generating businesses, which are largely cushioned from volatile crude oil price cycles," AmBank Research said. (S$l = RM3.16)