Analysts upgrade Dialog’s earnings estimates
16 May 2019
Source: The Sun
PETALING JAYA: Analysts are positive on Dialog Group Bhd’s performance for the third quarter ended March 31, 2019 (Q3 FY19) and have revised upwards their earnings estimates for the group.
PublicInvest Research said the group’s financial results were above expectations, accounting for 85% of its estimates and 84% of consensus estimates. Despite lower revenue for 9MFY19, core net profit jumped 22.8% for the period due to cost savings realised from completed projects.
“We revise our FY19-21 earnings estimates higher by an average of 2.8% on improved profit margins and contribution from joint venture (JV) and associates,” it said in its report yesterday.
“Moving forward, we expect more to come from its Pengerang Deepwater Terminal (PDT) projects. We like Dialog for its operational track record, defensive business model and steady recurring income generation from its tank terminal business. Our ‘outperform’ call on Dialog is affirmed with a sum-of-parts (SOP) derived target price of RM3.74,” it added.
AmBank Research reiterated its “buy” recommendation on Dialog with a higher SOP based fair value of RM3.85 per share, from RM3.66 per share earlier.
“We have raised Dialog’s FY19F earnings by 3-9% from higher margin assumptions for its Malaysian operations and associate contributions as the group’s 9MFY19 net profit of RM395 million came in above expectations, accounting for 81% of our earlier FY19F net profit and 83% of consensus,” it said.
The research house said Dialog’s higher-than-peer premium is justified given Dialog’s long-term recurring cash flow generating businesses, which are largely cushioned from volatile crude oil price cycles, and further underpinned by the Pengerang development’s multi-year value re-rating bonanza and a healthy net cash balance.
On the commencement of the construction of a storage terminal, common tankage facilities and deepwater marine facilities for PDT Phase 3, PublicInvest Research is positive on the development as it will expand the group’s longterm recurring income portfolio and provide more job opportunities to its engineering, construction, fabrication and plant maintenance divisions.
However, the potential earnings contribution is difficult to estimate due to limited information, and will be somewhat dependent on the final structure and terms of the agreement.
Dialog’s share price gained 21 sen or 6.8% to RM3.28 yesterday on 27.5 million shares done.