18 May, 2017
Source: The Star


By UOB Kay Hian
Target Price: RM 2.15

DIALOG'S core nine-month 2017 profit of RM230mil represents 75% of Dialog's and 72% of consensus estimates respectively.

This, the research house said, excluded a RM22mil gain from the asset disposal of an office/warehouse in Singapore and a RM15mil foreign exchange gain.

"Malaysian revenue benefited from ongoing progress in downstream projects (Jetty Topside works and engineering and procurement, construction and commissioning (EPCC) for Pengerang phase 2, and plasticizer plant in Kuantan).

"Although the group is still experiencing low demand for specialist products especially from upstream clients, international operations improved bottom line performance on EPCC activities in Singapore and improved sales of specialised products on a year-on-year basis."

UOB Kay Hian said the group's capital expenditure (capex) outflow surged from RM300mil to RM600mil due to the ongoing progress of Pengerang phase 2.

"The LNG terminal is on track to be ready by end-2017 and the jetty could be operational by the second half of 2017 to receive vessels. Dialog remained in net cash as the higher borrowings to fund the capex were offset by its higher cash position."

The research house pointed out that in its results announcement, the group officially guided that it is seeking partners for phase 3.

"This comes as Saudi Aramco's involvement in the Pengerang mega complex elevates investor appeal for Dialog's projects. As per our earlier company note, we were guided that another 200 to 300 acres of landbank can be reclaimed as a potential phase 3 development." UOB Kay Hian said this is separate from the buffer industrial land which is adjacent to the Sungai Rengit industrial estate.

"We forecast a strong fourth quarter 2017 performance especially from the Pengerang joint venture (phase one) due to the high base in storage rates coupled by favourable exchange rates in Singapore dollars. The next two years of earnings growth will be driven by new contributions from the progressive start-ups of phase 2 in 2018 and 2019.