Journey to Wealth
Dialog Group - Growing recurring earnings base Buy
- We maintain our BUY call on Dialog Group (Dialog), with an unchanged sum-of-parts-derived fair value of RM2.85/share. Our fair value implies an FY14F PE of 25x- at parity to its threeyear average but below its peak of 40x in 2007.
- We maintain FY13F-FY14F net profits, as FY12 net profit of RM177mil came in within our and street estimates. We introduce FY15F net profit with an earnings growth of 11%, supported by the continuing phases of the Pengerang project.
- The group declared a 4QFY12 final single-tier dividend of 2 sen/share, which leads to a flat QoQ full-year dividend of 3.1 sen/share, as expected at a payout ratio of 40%.
- Dialog's FY12 net profit rose 16% YoY due to:- (1) higher revenue from the group's specialist products & services locally and in Asia, Russia and the Middle-East, (2) Full contribution from Fitzroy Engineering Group, and (3) initial contributions from the 76,000 cu metre-Langsat 1 Phase 3 (September 2011) and 171,000 cu metre-Langsat 2 (January this year) tank terminals.
- The group's 4QFY12 net profit rose 20% to RM50mil in tandem with a 19% revenue increase to RM500mil, driven by higher contributions from the specialist and products segment as well as initial contributions from the 150-acre Pengerang Phase 1, which involve land reclamation work and is now undertaking the construction of 1.3mil cu metres of tank terminal capacity.
- We expect further positive newsflow as the group is investing further in its Balai cluster field project with joint-venture partners RocOil and Petronas Carigali by outsourcing the fabrication of four offshore wellhead platforms, which will be utilised for production activities. We understand that the group is still actively pursuing two more marginal field risk-sharing contracts. Dialog also plans to venture into enhanced oil recovery projects with its recent memorandum of understanding with Halliburton Energy Services.
- We remain positive about the group's expanding recurring earnings profile which stems from:- 1) Further expansion in tank terminal operations in Pengerang, potentially from an estimated 5mil cu metres to 8-10mil cu metres which could further raise our SOP by 13% to RM3.21/share, 2) Potentially 2 new small field concessions added to the Balai project, and 3)Synergising engineering/construction, fabrication, specialist products/services and maintenance operations which can further leverage on the growth of the group's expanding tank terminal and marginal field operations.
- The stock currently trades at an attractive FY14F PE of 22x, below its 2007 peak of 40x.
Source: AmeSecurities
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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....
