PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 26 Nov 2020, 11:22 AM


Dialog Group - Within Expectations

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Dialog reported an improvement of 20% YoY in its 4QFY20 core net earnings. Cumulatively, the Group reported a 13.7% YoY increase in its FY20 core net earnings to RM608.3m. The numbers were in line with our and consensus expectations, accounting for 98.5% and 104% of full-year projections. Performance was mainly supported by the higher contribution from JV and associate profits (+34.3% YoY) with the commissioning of the second phase of PDT2 as well as additional contributions from Phase 1E and Langsat 3 starting 3QFY20. Dialog’s earnings are expected to remain resilient amid the current operating climate with FY21 onwards seeing full-year contributions from Phase 1E’s 430,000 cubic metre (cbm) and Langsat 3’s 120,000 cbm storages. Our earnings estimates are maintained, along with our Outperform call. TP is raised to RM4.10 (from RM3.69 previously) on removal of the 10% discount previously ascribed, as we see greater stability in industry prospects. We continue to like Dialog for its strong track record, defensive business model and steady recurring income generation from its tank terminal business.

  • Higher QoQ revenue and net profit. Dialog reported higher revenue of RM539.9m in 4QFY20, up 6.8% QoQ, on improved rates and added capacities from the Langsat Terminals, in addition to more works related to plant maintenance activities. In tandem with this, earnings for the quarter improved 10.3% QoQ. Net profit margin in 4QFY20 was slightly higher at 30.8% (3QFY20: 29.9%), thanks to cost reduction measures undertaken by the Group on its capital and operating expenditures amid the challenging financial quarter.
  • Outlook. JV and associate contribution from the terminals business will remain intact. While maintaining current utilisation rate of 90% - 100%, we foresee rates also remaining stable due to higher demand during this period. Tank terminal spot rates have risen from SGD5–5.5/cbm to SGD6.5–7/cbm currently, benefitting its Phase 1 650,000 cbm storage. This is expected to mitigate the expectedly weaker performance in its upstream business due to current oil price conditions. FY21 onwards will see full-year contribution Phase 1E’s 430,000 cbm and Langsat 3’s 120,000 cbm storages. Further ahead, earnings will expand with the Phase 3 of PDT and BP Singapore expected to commence commercial operations in mid-2021. Meanwhile, the Group’s recent investment for another 85,000 cbm storage capacity in the Langsat Terminal is targeted for completion and ready for operations by the end of 2021.

Source: PublicInvest Research - 19 Aug 2020

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