Dialog’s 1QFY18 results were in line with expectations, accounting for 22% of our and the street’s FY18 forecasts. The better result was driven by better performance from Malaysia, as well as Indonesia, Thailand and India markets. 1QFY18 also saw margin expansion, which resulted in the higher net profit. Maintain HOLD with an unchanged TP of RM2.30 based on our SOTP valuation.

In Line With Expectations

Dialog booked in 1QFY18 headline net profit of RM161m, which increased 97.9% yoy. After stripping out the one-offs, which consisted of RM65.6m fair value gain on disposal of a JV, RM5.6m PPE disposal gain and RM0.6m forex gain, fiscal 1Q core profit stood at RM89.2m (+40.7% yoy) and in line with expectations.

YoY Improvement Seen at Revenue and Associate/JV

Dialog’s 1QFY18 revenue increased by 19.1% yoy to RM778.7m. The increase was attributed to a stronger performance from Malaysia as a result of higher engineering & construction (E&C) and plant maintenance services. Indonesia, Thailand and India also reported better sales in terms of its specialist products and technical services, offsetting the lower E&C contribution in Singapore. Associate and joint ventures profit improved 8% yoy to RM27.1m as demand remained robust at the Pengerang, Tanjung Langsat and Kertih terminals. In tandem with the better revenue, the EBITDA margin also improved 2.1ppts to 13%.

Maintain HOLD and TP of RM2.30

The construction of Pengerang Deepwater Terminal (PDT) Phase 2 remains on schedule and targeting to commission by 2019. This coupled with the recent 300,000cbm³ expansion into Tanjung Langsat 3 terminal will continue to drive better near-term earnings. We make no changes to our earnings forecasts. We maintain a HOLD rating with an unchanged TP of RM2.30 based on our SOTP valuation.

Risk to Calls

Key upside risks include new EPCC contract wins. Downside risks include any unforeseen delay in PDT Phase 2 EPCC works and operational hiccups in its existing tank terminal business.

Source: Affin Hwang Research - 22 Nov 2017