• Dialog’s FY20 core net profit at RM588m was within expectations, making up 101% of our and consensus full-year estimates
• Malaysian activities were higher qoq in 4QFY20 which may suggest higher Master Service Agreement (MSA) activities, offsetting the weaker upstream performance following the slump in global oil prices
• FY20 dividend payout ratio was lower at 28% (3.1sen) vs FY19 payout of 40% (3.8sen). Reiterate Buy with an unchanged target price at RM4.30. Dialog is one of our country and sector top Buys

FY20 Profit Grew 10% Yoy

Dialog’s FY20 core net profit of RM588m (+10% yoy) made up 101% of our and consensus full-year forecasts. FY20 EBITDA grew by 11% yoy attributable to the consolidation of Halliburton Bayan Petroleum (HBP) since August 2019, and full operation of Langsat 3 additional capacity since January 2020. JV profit was higher by 34% yoy driven by higher Pengerang Deepwater Terminal (PDT) utilisation and storage rates.

Higher local activities offset weaker international, JV showed one-off profit dip

Malaysian activities recorded a 27% qoq increase in revenue, possibly from higher MSA work recognition, which helped to offset the weaker upstream revenue as global oil prices plunged. Middle East revenue dipped to its lowest since 4QFY17 on the back of a slowdown in upstream activities. JV profit declined 26% sequentially to RM54m (3QFY20: RM73m) largely due to a foreign translation loss recorded at the Pengerang LNG2 regasification terminal, which was guided to be around RM20m impact. Stripping that off, JV profit would have been relatively flattish. Otherwise, PT1SB continued to operate near full utilisation with storage rates well supported at SGD6.50-7/cbm.

Country Top Pick Buy, Unchanged TP at RM4.30

We introduce our FY23 forecast, with no changes to our existing estimates. We maintain our SOTP-based target price at RM4.30, already factoring in a 3m cbm initial Phase 3 development, but yet to include the latest 200,000 planned Langsat 3 expansion. The latest Langsat 3 expansion plan, while immaterial to overall group capacity (+4.7%), is positive nonetheless, as it continues to showcase a high storage demand. Maintain Buy. Downside risks: weaker storage utilisation and rates, delay in Phase 3 construction work and securing new off takers.

Source: Affin Hwang Research - 19 Aug 2020