Journey to Wealth
Dialog - 3Q12 below expectations
Period 3Q12
Actual vs. Expectations
3Q12 net profit of RM41.4m came in below expectations. We had expected it to be RM55m. We believe the discrepancy would be due to timing issue for its EPCC jobs.
9M12 net profit of RM127.4m accounted for 62% and 65% of ours as well as the consensus' fullyear estimates.
Dividends Declared net DPS of 1.1 sen in 3Q12 vs. 1.3 sen last year. Ex-date: 15 Jun, payment date: 29 Jun.
Key Results Highlights
QoQ, flattish 3Q12 net profit, which we believe was due to timing issue for its EPCC jobs, despite revenue surging 17%. The increase in revenue was partly due to the commencement of LT2.
8% YoY hike in 3Q12 net profit and 19% jump in 9M12 net profit were due largely to earnings contributions from New Zealand-based Fitzroy Engineering Group Ltd, which was acquired in Apr 2011.
Outlook Despite the soft 3Q12 results, we expect its earnings to reach a high phase from 2HFY12 onwards as the new source of incomes kicked in, such as LT2 and EPCC jobs from the LT3, Pengerang CTF and Balai Marginal Fields contracts. These in-house EPCC jobs should keep Dialog busy till 2014.
Change to Forecasts
We have cut our FY12E-FY14E EPS and GDPS by 9%, 4% and 4% respectively due to:
1) an overestimation of Pengerang CTF's EPCC job in FY12 where we had assumed the job to start in Jul 2011 but it actually started only in Nov 2011, and
2) the cut in our operating margin estimates for LT1 & LT2 to 22.5% from 35% respectively as per the latest management's guidance.
Rating MAINTAIN OUTPERFORM
Valuation We are rolling over our valuation base year to 2013 from 2012, thus our SOP-derived price target is now RM3.09/share from RM2.80/share despite our earnings downgrade.
Risks Delays in its in-house EPCC jobs that will impact its future recurring incomes negatively.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
